2007 International Law Update, Volume 13, Number 4 (April)

2007 International Law Update, Volume 13, Number 4 (April)

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

ALIEN TORT CLAIMS

Upon rehearing of dispute over unhealthy pollution from Rio Tinto mine in Papua New Guinea, Ninth Circuit reverses dismissal of residents’ claims and re‑affirms that Alien Tort Claims Act contains no exhaustion requirement

The Plaintiffs, former and current residents of Bougainville, Papua New Guinea (PNG), allege that they or their family members suffered multi‑faceted abuse at the hands of the global mining company, Rio Tinto, PLC (Defendant). After an uprising at the mine in 1988, a decade of civil war ensued in which the PNG army intervened, killing thousands of its own residents.

Plaintiffs filed suit mainly under the Alien Tort Claims Act (ATCA) and the U.N. Convention on the Law of the Sea (UNCLOS) in a California federal court. When Defendant moved to dismiss the complaint, the court sought guidance from the U.S. Department of State (DOS) “as to the effect, if any, that adjudication of this suit may have on the foreign policy of the United States.” In November 2001, the DOS filed a “Statement of Interest” (SOI); it opined that the potentially adverse effect of this suit on U.S. foreign relations with PNG would be severe.

The district court dismissed all claims as non‑justiciable under the “political question doctrine (PQD);” furthermore, it threw out the racial discrimination claim under the “Act of State” doctrine (ASD). The U.S. Court of Appeals for the Ninth Circuit initially affirmed. Then it granted Defendant’s petition for rehearing en banc and decides that Plaintiffs can try most of their claims in the U.S. The Court also vacates and remands for the lower court to reconsider (1) its dismissal on ASD grounds of Plaintiffs’ claim under the UNCLOS, and (2) the dismissal of the racial discrimination and UNCLOS claims under the international comity doctrine. The central question here is whether the U.S. is the appropriate forum for resolving the Plaintiffs’ claims.

The Plaintiffs suggest that the PNG Government no longer opposes this suit. In support thereof, they submitted statements and letters by the PNG Prime Minister, the Chief Secretary of the PNG Government, and the Interim Bougainville Provincial Governor.

First, the Ninth Circuit addresses the PQD. The District Court thought that all of Plaintiffs’ claims presented non‑justiciable political questions. As in the Court’s prior opinion, it considers the following four factors of those set forth in Baker v. Carr, 369 U.S. 186, 217 (1962) relevant: [1.] “a textually demonstrable constitutional commitment of the issue to a coordinate political department”; [4.] “the impossibility of a court’s undertaking independent resolution without expressing lack of the respect due coordinate branches of government”; [5.] “an unusual need for unquestioning adherence to a political decision already made”; and [6.] “the potentiality of embarrassment from multi‑farious pronouncements by various departments on one question.”

As for Factor 1, the Court finds that the law does entrust the judiciary to rule on Plaintiffs’ properly alleged ATCA claims. As for Factors 4, 5, and 6, the Court first ponders what weight to give the SOI. Several Circuits have refused to consider a SOI decisive.

“When we take the SOI into consideration and give it ‘serious weight,’ we still conclude that a political question is not presented. Even if the continued adjudication of this case does present some risk to the Bougainville peace process, that is not sufficient to implicate the final three Baker factors ... The State Department explicitly did not request that we dismiss this suit on political question grounds, and we are confident that proceeding does not express any disrespect for the executive, even if it would prefer that the suit disappear. ...”

“Nor do we see any ‘unusual need for unquestioning adherence’ to the SOI’s nonspecific invocations of risks to the peace process. And finally, given the guarded nature of the SOI, we see no ‘embarrassment’ that would follow from fulfilling our independent duty to determine whether the case should proceed. We are mindful of Sosa’s instruction to give ‘serious weight’ to the views of the executive, but we cannot uphold the dismissal of this lawsuit solely on the basis of the SOI. See Sosa v. Alvarez‑Machain, 542 U.S. 692 (2004)” [Slip op. 14].

Second, the Court turns to the ASD. “[A]n action may be barred if (1) there is an ‘official act of a foreign sovereign performed within its own territory’; and (2) ‘the relief sought or the defense interposed [in the action would require] a court in the United States to declare invalid the [foreign sovereign’s] official act.’ ...” [Slip op. 16]

“If these two elements are present, we may still choose not to apply the [ASD] where the policies underlying the doctrine militate against its application. The Supreme Court discussed three such policies in [Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 428 (1964)]:” ‘[T]he greater the degree of codification or consensus concerning a particular area of international law, the more appropriate it is for the judiciary to render decisions regarding it . . . . [2] [T]he less important the implications of an issue are for our foreign relations, the weaker the justification for exclusivity in the political branches. [3] The balance of relevant considerations may also be shifted if the government which perpetrated the challenged act of state is no longer in existence. Sabbatino, 376 U.S. at 428.” [Slip op. 16]

Here, the District Court dismissed the racial discrimination and UNCLOS claims under the ASD. The Court finds that the alleged racial discrimination at the mine, if proven, would constitute a ius cogens violation, and it would thus not be a “sovereign” act. The UNCLOS claims relate to PNG’s actions in exploiting its own natural resources. The Court cannot decide at this stage whether UNCLOS norms would also be ius cogens norms, and the alleged UNCLOS violations should presumably be sovereign acts. The District Court should revisit its previous reliance on the SOI in the ASD context. The Court therefore vacates the UNCLOS dismissal.

Third, the Court turns to International Comity, which the District Court invoked in dismissing the Plaintiffs’ racial discrimination and UNCLOS claims. The Restatement of the Foreign Relations Law of the United States, Section 403(2) proposes factors relevant to exercising jurisdiction over a person or activity. These factors may include whether the activity has links to the territory of the regulating state, and the nature of these links (such as nationality, residence, or economic activity) between the regulating state and the person principally responsible for the activity to be regulated. While the lower court had declined to exercise jurisdiction, this Court vacates and remands so that the court below can revisit its reliance on the SOI in the international comity context. The District Court may have to develop the facts further to determine whether the Restatement factors apply.

Finally, the Court reconsiders whether ATCA involves a requirement to exhaust local remedies. The District Court held that no such element existed. Defendant filed a cross‑appeal. Two eminent scholars filed an amicus brief supporting Defendant’s position.

Neither the Supreme Court nor the Circuit Courts have resolved this question. The Ninth Circuit has upheld the justiciability of ATCA claims without demanding exhaustion. The legislative history is silent. ATCA simply 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.” 28 U.S.C. Section 1350.

The more recent Torture Victims Protection Act of 1991 (TVPA), Pub. L. No. 102‑256, 106 Stat. 73 (1992) (codified at 28 U.S.C. Section 1350), does expressly require exhaustion. Since there are not enough indications that Congress intended ATCA to impose this hurdle upon plaintiffs, it would be inappropriate to impose an exhaustion element by judicial fiat.

Citation: Sarei v. Rio Tinto, PLC, 2007 WL 1079901; No. 02‑56256 (9th Cir. April 12, 2007). [See report of prior ruling at 2006 International Law Update 142.]

CHILD ABDUCTION

In case of alleged child abduction under statute implementing Hague Convention, Tenth Circuit declines to order immediate repatriation of thirteen‑year‑old child to Canada with his mother based solely on child’s expressed desire to remain with his father in U.S. pending decision on permanent custody

In Oklahoma, S.L.V.M. Cyndie de Silva (de Silva or Petitioner) and Paul Pitts (Pitts or Respondent) had a son together in 1993 named Jonathan. The two never married. Petitioner then registered Jonathan as a citizen of Sri Lanka, her native country. The following year, Petitioner took Jonathan to Sri Lanka without Respondent’s permission. An Oklahoma state court later awarded Respondent full custody. Respondent, however, gave up custody to Petitioner in light of her custody proceeding in Sri Lanka where Petitioner was likely to prevail.

Petitioner fled Sri Lanka with Jonathan in 2003 and settled in Canada. In 2005, after he had visited Respondent in Oklahoma, Jonathan decided that he did not want to return to his mother. Petitioner then asked a Canadian court to enforce the Sri Lankan custody order.

During the course of the Canadian proceeding, Petitioner also sued Respondent in U.S. district court to have her son returned to Canada. She invoked the International Child Abduction Remedies Act (ICARA) [42 U.S.C. Sections 11601‑11610] which implemented the Hague Convention on the Civil Aspects of International Child Abduction (Convention) [1988 WL 411501, T.I.A.S. No. 11,670]. The Convention’s purpose is to protect children from being wrongfully removed or retained in a foreign country and to facilitate their return.

After hearing from the parties and interviewing Jonathan, the district court denied Petitioner’s ICARA request. She appealed. The U.S. Court of Appeals for the Tenth Circuit affirms, reasoning that the child would be better off in Oklahoma pending the ultimate decision on permanent custody. Thus, the Circuit Court decides only the retention claim, (i.e. whether Respondent’s retention of Jonathan in Oklahoma is wrongful) and does not address the question of which parent is the more suitable.

“The removal or retention of a child is wrongful where it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention, where such rights were actually exercised by the parent seeking return of the child. The Petitioner bears the burden of showing by a preponderance of the evidence that the removal or retention was wrongful.”

“More specifically, the Petitioner must show that: (1) the child was habitually resident in a given state at the time of the removal or retention; (2) the removal or retention was in breach of Petitioner’s custody rights under the laws of that state; and (3) petitioner was exercising those rights at the time of removal or retention.” [Slip op. 2]

“As an initial matter, ... the Petitioner, was required to establish that [Respondent’s] retention of Jonathan in Oklahoma was wrongful. To do that, she had to show by a preponderance of the evidence that [Respondent] retained Jonathan away from Jonathan’s habitual residence. She was also required to show she was exercising her parental custodial rights at the time of the wrongful retention (or at least would have exercised those rights but for the wrongful retention) under the laws of the country of Jonathan’s habitual residence. Friedrich v. Friedrich, 983 F.2d 1396, 1400 (6th Cir. 1993).”

“Once a Petitioner establishes that removal was wrongful, the child must be returned unless the Respondent can establish a defense. Friedrich v. Friedrich, 78 F.3d 1060, 1067 (6th Cir. 1996). There are four defenses set out in the Convention, which are narrowly construed, [cite], and which are not relevant here. There is also a fifth consideration, left to the discretion of the judicial or administrative authority, which allows for refusal to order the return of a child where ‘the child objects to being returned and has attained an age and degree of maturity at which it is appropriate to take account of its views.’ Hague Convention, 1988 WL 411501, Art. 13.” [Slip op. 6‑7].

In applying this “age and maturity” exception, the court must keep in mind the Convention’s purpose. ... The Convention does not specify an age for this determination. In this case, a magistrate judge interviewed Jonathan in camera outside the parents’ presence. By this time 13 years old, Jonathan explained that he preferred to remain with his father in Oklahoma because he had a nice home there and a greater chance to get a good education.

The Judge thought that Jonathan was bright, expressive, and understanding of his parents’ situation. Thus, the Judge acceded to Jonathan’s wish to stay with Respondent until some court or agency formally rules on permanent custody since it appears to be in Jonathan’s best interest.

Citation: Silva v. Pitts, 481 F.3d 1279 (10th Cir. April 5, 2007).

CHOICE OF LAW

In litigation prior to trial over validity and effect of Compromise Agreement among Jewish family members as to size and allocation of decedent’s estate where Rabbinical tribunals in New York and Switzerland are involved, U. K. Court of Appeal (Civil Division) rules that relevant EU Conventions limit choice of controlling law to that of countries, thus limiting choice to English versus Swiss law but that Agreement might be read as incorporating some principles of Jewish law as terms of contract

A judgment handed down by a Queens Bench judge dealt with an application for summary judgment brought by the Claimants. The Claimants are the son (Israel) and grandson (Samuel) of the late Rabbi Joseph Halpern and his wife Frieda, also deceased. This is an appeal from that judgment.

Their claim was to enforce a Compromise Agreement which they allege to have been reached between Israel and Samuel (who at all material times acted for his father Israel) and the Defendants (four other sons and a daughter of Joseph and Frieda). The Compromise was of an arbitration before a Beth Din composed of three Rabbis which for the most part was taking place in Zurich. The parties had intended that the arbitration was to settle issues, which had arisen after the deaths of Joseph and Frieda, between Israel (the first claimant) and his siblings relating to what he deemed to be his due inheritance.

The first three Defendants (Mordecai, David and Jacob) were the executors of both estates. The dispute, however, was not simply about the distribution of the estates (valued for Probate, as we were shown but the judge was not, in the case of Joseph at L309,945 and in the case of Frieda at L210,000). More importantly, it was to decide whether there were other assets which the Defendants should take account of in assessing what should be Israel’s fair share.

Mordecai made the Compromise on behalf of himself, his two executor brothers, another brother, Aaron, and his sister, Esther, as party A, and Israel and his son Samuel who had represented Samuel during the arbitration as party B. Mordecai drafted the agreement in Hebrew and an agreed upon translation was entered into the record. Although Claimants named all those listed as party A as Defendants, service was had only upon the three executor brothers.

As a ground for setting aside the Compromise, the executor brothers rely on the fact that a different Beth Din sitting in New York awarded the sister, Esther (as against the executor brothers) the whole of the estate which apparently involves several million pounds. The main area of dispute thus relates to whatever assets lie outside the estate as valued for probate.

That is further confirmed by the fact that, under the Compromise, if it be valid, Israel was to receive L2.4 million. The appellate court is concerned as to how the parties could square the figures at which the estates had been valued for probate with these figures, and especially with the L4M said to be the value of the estate the New York Beth Din awarded to Esther.

The Court mentioned another disturbing term of the Compromise relied on by the executor brothers as a condition precedent to any liability as to them. This was that all documents produced during the arbitration before the Beth Din in Zurich should be destroyed or handed over to the Defendants.

Moreover, Samuel had charged that the reason for such a term was to cover up a tax fraud on Her Majesty’s Revenue and Customs (HMRC). Indeed, the Court is worried about whether the parties are asking it to legitimize a Compromise agreement, one goal of which is to hide the true facts from HMRC. As a result, the Court requested that the executors swear out affidavits and allowed Israel and Samuel a chance to respond. The question then arises as to what steps we should take. The Court of Appeal, however, discerns a key point of law which it ought to resolve on a preliminary basis, i.e. the question as to the law governing the Compromise. This is the point on which the parties focused the most time and effort.

Thus, the defense wrote a memorandum headed “Application of Jewish law”. It referred to the submissions to arbitration and pleaded that Jewish law (Halakha) was intended not only to be the lex causa as well as the lex curia but also would regulate procedure. It took the following position: “Accordingly, in addition to the matters identified herein which offend ordinary principles of fairness and natural justice, it is further alleged that the Compromise Agreement is ineffectual by reference to Halakha. These Defendants intend to seek permission from the Court to rely upon expert evidence and to serve further particulars of the breaches of Halakha that are relevant to the issues in this claim.” [¶ 15].

“Only in its written submissions for the hearing below did Appellant expressly contend that the applicable law of the Compromise Agreement was Jewish law. Even then it was not identified precisely what the effect of applying Jewish law was as compared to the application of either English law or possibly Swiss law. .... During argument, Appellant suggested that if Jewish law applied there might be differences of consequence. For example, a point was developed by reference to the statement of Rabbi Gartner, exhibited to Mordecai’s statement, ... that, under Jewish law, if duress or mistake were established that would render the Compromise void ab initio and not, as under English law, voidable.”

“This led ... to the judge referring to Shamil Bank of Bahrain EC v Beximco Pharmaceuticals [2004] 1 W. L. R. 1784, a decision of the Court of Appeal which the judge suggested, at the very least, cast doubt on the question whether Jewish law, as opposed to the law of a country, could ever be adopted, expressly or otherwise, as the law applicable to contract ...under English conflict of laws principles.”

“Appellant submitted that the Compromise contained terms which, either expressly or by implication, agreed [on] Jewish law as the applicable law. His argument ... was primarily that Shamil was distinguishable and thus English conflict of laws would recognize that since there was a body of law recognized as Halakha, i.e. Jewish law, that law could be the applicable law of the contract in a true sense.”

“Alternatively, he argued that, as a matter of construction, Halakha would, if chosen as the applicable law whether expressly or by implication, be incorporated into the contract as terms thereof similarly to the way in which the Hague Rules can be incorporated.”

“In the further alternative it was argued that Israel, by submitting the dispute to a forum (the Beth Din) applying Jewish law, was thereby representing that he would be seeking no more than Jewish law would allow him to recover and should be stopped from recovering anything that was irrecoverable as a matter of Jewish law. The judge [below] ruled against the Defendants on all these points.”

As to the applicable law of the Compromise, the Court notes, “There were, Appellant suggested, four questions (1) could the parties as a matter of English conflict of laws principles choose Jewish law as the applicable law of the Compromise? (2) Did the parties choose Jewish law expressly as the applicable law of the Compromise? (3) If they did not choose Jewish law expressly did they choose Jewish law by necessary implication? (4) If the parties did choose Jewish law, and the answer to (1) is that English conflict of laws will not allow for the choice of Jewish law as the applicable law, is there any other way in which effect could be given to the parties’ choice?”

“Posing the questions in this way ... risks raising points in an academic way, when what the court should be concentrating on is what the parties agreed in this case, first in relation to the applicable law of the contract and second as to the applicability of Jewish law and the extent to which effect, depending on what they agreed, can be given to that agreement.”

The Court decides to approach the matter by considering the true nature of the Compromise Agreement and its applicable law, applying English conflict of laws principles. In the course of so doing, it can address the answer to the questions posed by [Appellant] in their context. The Court first asks what have the parties agreed expressly or by implication as to the applicable law to govern their contract?

“This question must be answered by reference to English conflict of laws principles. The Contracts (Applicable Law ) Act 1990, as its preamble states, makes provision as to ‘the law applicable to contractual obligations in the case of conflict of laws’. It provides by Section 2 ‘subject to subsections (2) and (3) below, the Conventions shall have the force of law in the United Kingdom.’ In the Act the Conventions mean the Rome Convention, the Luxembourg Convention and the Brussels Protocol, all of which are set out in schedules to the Act. Section 3 provides guidance as to interpretation allowing reference in relation to the Rome Convention to the reports on that convention by Professors Gillian and Lagarde.”

“By Article 1 of the Rome Convention , the rules of the Convention apply ‘to contractual obligations in any situation involving a choice between the laws of different countries’. ... First [the Court does] not accept Appellant’s submission that the Rome Convention does not apply because the dispute as to which law applies relates to a law other than one of a country. That argument would be hopeless in my view, even if the choice was simply between Jewish law and English law, for the reasons I shall express below but in fact the contest in this case is between English law, Swiss Law and Jewish law ‑‑ in other words the situation does involve a choice between the laws of different countries.”

“But the fundamental reason why the argument is hopeless is because the starting point for the Rome Convention was a point accepted by all countries party to that Convention, that laws could not exist in a vacuum; by ‘laws’ were meant laws enforceable in the courts of countries whether parties to the Convention or other states. Paragraph 32‑081 of the 14th Edition of Dicey, Morris and Collins puts the matter succinctly and ... correctly:‑‑ ‘... Article 1(1) of the Rome Convention makes it clear that the reference to the parties’ choice of ‘the law’ to govern a contract is a reference to the law of a country. It does not sanction the choice or application of a non‑national system of law, such as the lex mercatoria or general principles of law.’”

“It is suggested that a choice of lex mercatoria or general principles of law is not an express choice of law under the Rome Convention . So also in Shamil Bank of Bahrain EC v. Beximico Pharmaceuticals Ltd., the Court of Appeal held that a choice of the principles of Sharia law was not a choice of law of a country for the purposes of the Rome Convention.” “Further support for the view that the Convention had in mind the laws of a country, and that it was not intended that persons should be able to contract out of the Convention, is gained from other provisions of the Convention e.g. Article 3(3) the inability to derogate from mandatory rules of a particular country and Article 7 applying mandatory rules of another country ‘when applying under this convention the law of a country’.”

“However it would seem that a compromise of an arbitration dealing with a dispute as to whether assets outside an estate should be brought into account in order that one party should gain his fair share could not be termed a contract relating to ‘wills and succession’.”

“Fourth, and finally, the use being made of Shari’a law, strict or modified by Saudi law, was to interpret the obligations under the agreement to arbitrate, which ... is a legitimate use of a body of law or rules which do not have the force of law of a country or state.” [ ¶¶ 16‑22].

The Court thus concludes that the rules of the Convention do apply to the Compromise Agreement. “That being so a choice has to be made as to which is the applicable law, and the choice can only be between the laws of different countries. Article 3(1) provides:‑‑ ‘A contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice, the parties can select the law applicable to the whole or a part only of the contract.’”

“Three points should be noted ‑‑ (1) the choice may be express; (2) if it is to be implied, the implication must be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case; and (3) the choice can relate to the whole contract or part of a contract.”

“The Compromise makes no express choice of the law of any country or indeed any express choice of law at all. Furthermore it cannot ... be said that any implication of a choice of law of any country can be demonstrated with any certainty. ... [thus] Article 4 [is] applicable in the absence of choice.”

“The material parts of Article 4 provide as follows:‑‑ ‘1. To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with another country may, by way of exception, be governed by the law of that other country.’”

“The choice lies between Swiss and English law and, since no one has suggested that Swiss law is any different from English law, a decision as to which law is the applicable law is actually unnecessary. But if the issue did arise, Article 4(2) would seem to indicate that since Mordecai and the executor brothers resided in England that English law should be the applicable law. Again ... different laws may apply to different parts of the contract.”

“It follows that, as a matter of English conflict of laws principles, there can be no question of Jewish law being agreed either expressly or by implication as the applicable law of the contract. The applicable law is English law.”

The next question is whether Jewish law has any relevance here? “It seems to me that the answer is that it may have. By Article 10 of the Convention the applicable law, English law, will govern ‘(a) interpretation, (b) performance, (c) within the limits of the powers conferred on the court by its procedural law, the consequences of breach, including the assessment of damages, insofar as it is governed by rules of law; (d) the various ways of extinguishing obligations, and prescription and limitation of actions.’ ...”

English law does make it possible to incorporate some provisions of foreign law as a term or terms of the contract. It was this aspect which the Court addressed in some detail in Shamil. That Court reasoned as follows:‑‑ “49. [Counsel] thus opts for a construction that the wording is apt, and intended, to incorporate into English law for the purposes of its application to the contract, the ‘principles of ... Sharia’. In this respect, and no doubt to avoid the difficulty that the principles of Sharia, generally stated, are of broad nature and application ..., [Counsel] argues that the clause should be read as incorporating simply those specific rules of Sharia which relate to interest and to the nature of Morabaha and Ijarah contracts, thus qualifying the choice of English law as the governing law only to that extent.” [¶¶ 25‑31].

“Points which are said to arise outside questions of interpretation e.g. duress, mistake, frustration and the consequences thereof will be a matter of English law as the applicable law of the contract. But as an aid to interpretation ... , the context of the Compromise, including the fact that it was settling disputes, the subject of an arbitration, which was applying Jewish law, could make Jewish law material. [The Court says] ‘could’ only because apart from two matters ‑‑ the interpretation of Clause 4 and the question whether the executor brothers were taking on personal responsibility ‑‑ no question of interpretation has been identified as arising and even in those areas there has not been any evidence or pleading suggesting that Jewish law would dictate any different interpretation than English law.”

“This solution under which matters of interpretation can be assisted by rules or a law different from the applicable law of the contract, but matters affecting the contract as a whole must be dealt with by the applicable law is, as it seems to me, consistent with the Convention. ... If the applicable law of the contract is A but law B is expressed to cover some aspect of the contract, there has to be only one law which can cover matters such as mistake, repudiation of the whole contract etc and that must be the applicable law of the contract as a whole. The different law can only apply to that part of the contract. ...” [¶¶ 34‑35]

“Thus, if parties wish some form of rules or law not of a country to apply to their contract, then it is open to them to so agree, provided that there is an arbitration clause. The court will give effect to the parties’ agreement in that way.” [¶ 38].

“In that respect, [Appellant] seeks to rely upon the passage in Dicey & Morris at paragraph 32‑ 086, which expounds the distinction between reference to a foreign law as a choice of law to govern the contract (or part of a contract) on the one hand and incorporation of some provisions of a foreign law as a term or terms of the contract in question. While observing that it is sometimes difficult to draw the distinction in practice, it is there stated that: ‘... it is open to the parties to an English contract to agree, e.g., that the liability of an agent to his principal shall be determined in accordance with the relevant articles of the French Civil Code.”

“In such a case, the foreign law becomes a source of law upon which the governing law may draw. The effect is not to make French law the governing law of the contract but rather to incorporate the French articles as contractual terms into an English contract. This is a convenient ‘shorthand’ alternative to setting out the French articles verbatim. The court will then have to construe the English contract, ‘reading into it as if they were written into it the words’ of the French statute. 32‑087.”

“It often happens that statutes governing the liability of a sea carrier, such as the former Harter Act in the United States, or statutes implementing the Hague Rules ... are thus ‘incorporated’ in a contract governed by a law other than that of which the statute forms part. The statute then operates not as a statute but as a set of contractual terms agreed upon between the parties. The parties may make an express choice of one law (e.g. English law) and then incorporate the terms of a foreign statute. In such a case the incorporation of the foreign statute would only have effect as a matter of contract.”

“[The Court] cannot ...see why, in a context such as exists in this case, compromising disputes between Orthodox Jews under Jewish law, where it seems to be common ground [that] there is a distinct body of law, Jewish law may not be relied on as part of the contractual framework.” [¶ 50].

Citation: Halpern v. Halpern, 2007 WL 919472. [2007] E. W. C. A. Civ. 291 (Ct. App. (Civ. Div.) April 3, 1007).

EUROPEAN UNION (EXPORT REFUNDS)

In advisory opinion requested by Dutch court under Article 234EC, European Court of Justice explains that Dutch exporter of cheese to United States, some of which was immediately reshipped to Canada, is entitled to retain definitive refunds at higher U.S. rate unless Dairy Products Board proves that exporter intentionally abused refund system

Between 1988 and 1994, Vonk Dairy Products BV, the Applicant in the main proceedings in the Dutch courts, exported 300 consignments of Italian “pecorino” cheese per year to the United States, a total of 2,100 consignments.

With respect to those exports, the Applicant received from Productschap Zuivel (Dairy Products Board), Defendant in the main proceedings, differentiated refunds granted based on Regulation No. 3665/87. These became final after the release of the securities provided when the Defendant received the documents proving that the cheese consignments had been released for free circulation in the United States. A key fact is that the amount of those refunds for the pecorino cheese was higher when exported to the United States than to Canada.

The Algemene Inspectiedienst (General Inspectorate, “the AID”) of the Ministerie van Landbouw, Natuurbeheer en Visserij (Ministry of Agriculture, Nature Management and Fisheries) initially investigated the exports of cheese at issue in the main proceedings in the Dutch courts. That inquiry turned up irregularities on the Applicant’s part.

The AID, therefore, asked the U.S. Customs office in New York to launch an administrative investigation into those exports for the period 1988 ‑ 1994. The U.S. Customs investigation revealed the following facts. During that period, Orlando Food Corporation, a U.S. intermediary for the Applicant, almost immediately re‑exported 75 consignments of cheese to Canada, usually to the National Cheese & Food Company (NCFC) in Ontario.

It also appeared that the Applicant did not limit its role to exporting these consignments of cheese to the United States; Applicant knew that Orlando was forwarding the cheese to Canada and itself played a part in the Canadian marketing of those consignments. Furthermore, Applicant had corresponded on these matters with the NCFC.

Next, the Public Prosecutor in Roermond (Netherlands) started a judicial investigation of the Applicant and its officers about the possible falsification of documents. For example, the applications for the differentiated refunds referred to the United States as the country of destination for consumption, although it knew that some consignments of cheese ended up being sold in Canada . The AID included these findings in its official report of March 1997.

In April 2001, the Defendant Productschap Zuivel revoked its decisions granting refunds as to the 75 consignments in dispute and demanded the repayment of the sum of NLG 2,795, 841.72. This sum consisted of the difference between the applicable refunds for goods sent to the United States market and those applicable to goods shipped directly to Canada, plus 15%.

Since the Defendant rejected as unfounded the Applicant’s objection to that decision, the latter filed an appeal in the referring court. In support of that appeal, the Applicant submits that it had satisfied all the conditions set forth in Articles 4, 17(3) and 18 of Regulation No 3665/87 for obtaining differentiated refunds as to the consignments of cheese at issue. Moreover, the later re‑exportation of some of those consignments to Canada should have no effect on the grant of those refunds.

The Applicant also contended that the alleged irregularities were neither continuous nor repeated since by far most of the consignments which it exported to the United States were not re‑exported. Moreover, it pointed out that the judicial investigation dealt with the alleged falsification of documents and not with the revocation of refunds or the demand for repayment.

The Defendant considers the Applicant’s action to be unfounded. It stresses that it is essential, with respect to the payment of differentiated refunds, that the covered goods actually reach their market of destination. The fact that Applicant had taken part in re‑exporting a certain quantity of the pecorino cheese to Canada implies that the Applicant has a duty to repay the differentiated refunds at issue in the main proceedings.

Under those circumstances, the College van Beroep voor het bedrijfsleven (Administrative Court for Trade and Industry)(ACTI) decided to stay its proceedings and to refer the following questions to the European Court of Justice for an advisory ruling pursuant to Article 234EC: “1. Should the ACTI interpret the then applicable Articles 16 to 18 of Regulation (EEC) No 3665/87 as meaning that, if variable refunds are definitively paid after acceptance of the import documents, later evidence that the Applicant was involved in the re‑exportation of these goods may lead to the conclusion that the refunds have been wrongly paid only upon proof of abuse on the part of the exporter? ...”

“3. What criteria apply to enable it to be established whether there has been a continuous or repeated irregularity as referred to in the second subparagraph of Article 3(1) of Regulation (EC, Euratom) No 2988/95? ... [More] particularly [is] a continuous or repeated irregularity ... deemed to have occurred where the irregularity relates to a relatively small proportion of all transactions in a given period and the transactions in which an irregularity has been detected always concern different consignments?”

The Court of Justice (ECJ) then interprets the questions posed by the Dutch court. “By its first question, the national court seeks, in essence, to ascertain whether, in proceedings for the withdrawal and recovery of differentiated refunds which have been definitively paid on the basis of Regulation No 3665/87, a finding that those refunds have been wrongly paid means that evidence of abuse on the part of the exporter must be furnished.” [¶ 28].

“In particular, it is apparent from the order for reference that the Defendant in the main proceedings did not use the option [in ... Regulation No 3665/87] to request, before the refunds at issue were made definitive, additional evidence of such a kind as to establish that the products concerned had actually been placed on the market in the non‑member country of import in an unaltered state.”

“It is important to point out that, ... the decision to demand the repayment of those refunds is not based on the defective nature of the import documents furnished by the Applicant ... but on the fact that some consignments of cheese were re‑exported to another non‑member country almost immediately after being imported into the United States.” [¶ 30].

“A finding that the differentiated refunds definitively granted for the purposes of Regulation No 3665/87 were wrongly paid thus requires, where a proportion of all the products concerned was almost immediately re‑exported to another non‑member country, evidence of abuse on the part of the exporter.”

“That evidence involves first, a combination of objective circumstances from which it is apparent that, despite formal observance of the conditions laid down by the Community rules, the purpose of those rules has not been achieved, and, second, a subjective element consisting in the intention to obtain an advantage from the Community rules by creating artificially the conditions laid down for obtaining it . [Cite]. The existence of that subjective element can be established, inter alia, by evidence of collusion between the exporter receiving the refunds and the importer of the goods in a non‑member country other than the country of importation.”

“It is for the national court to verify whether the factors constituting such an abuse are present in the case before it in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined. [Cite].

“The Netherlands Government submits, in that regard, that evidence of abuse in terms ... on the part of the exporter has to be furnished only in cases where all the formal conditions for the grant of the refunds are satisfied, which is not true of the case in the main proceedings because, as the consignments of cheese which were re‑exported to Canada were not released for consumption on the United States market, the condition with respect to release for consumption in the non‑member country within the meaning of Article 17(3) of Regulation No 3665/87 has not been satisfied.”

“That argument cannot be accepted. It is apparent, firstly, ... that the Applicant in the main proceedings satisfied at a formal level all the conditions provided for by Regulation No 3665/87 in respect of the grant of the differentiated refunds at issue in the main proceedings, including those provided for in Article 17(3) of the Regulation, with the result that those refunds were definitively paid to it without the competent authorities of the Member States concerned having deemed it appropriate to require at the outset, on the basis of ... Regulation No 3665/87, that additional evidence be provided that the product had actually been placed on the market in the non‑member country of import in an unaltered state. Secondly, ... the Member State concerned in the main proceedings is not justified in requiring the repayment of definitively paid refunds, unless abuse on the part of the exporter is proven.” [¶¶ 32‑36].

“In the light of the foregoing, the answer to the first question referred for a preliminary ruling must be that, in proceedings for the withdrawal and recovery of differentiated refunds which have been definitively paid on the basis of Regulation No 3665/87, a finding that those refunds have been wrongly paid must be substantiated by evidence of abuse on the part of the exporter, furnished in accordance with the rules of national law.”

“Since the first question has been answered in the affirmative, it is unnecessary to answer the second question.”

“By its third question, the national court seeks, in essence, to ascertain the criteria applicable when assessing, whether an irregularity is to be regarded as continuous or repeated for the purposes of ... Regulation No 2988/95. It does so, in particular, with regard to a situation where the irregularity relates to a relatively small proportion of all the transactions in a given period and always concerns different consignments.”

“As stated, in essence, by Advocate General Sharpston at paragraph 82 of her Opinion, an irregularity is continuous or repeated for the purposes of the second subparagraph of Article 3(1) of Regulation No 2988/95 where it is committed by a Community operator who derives economic advantages from a body of similar transactions which infringe the same provision of Community law.”

“The fact that, as in the present case, the irregularity relates to a relatively small proportion of all the transactions carried out in a given period and that the transactions in which the irregularity has been detected always concern different consignments is immaterial in this respect. Those factors cannot be decisive for the purposes of establishing the existence of a continuous or repeated irregularity, otherwise operators may seek to avoid the application of the second subparagraph of Article 3(1) of Regulation No 2988/95 by artificially dividing their transactions.”

“It is for the national court to verify, in accordance with the rules of evidence of national law, provided that the effectiveness of Community law is not undermined, whether action constituting a continued or repeated irregularity has taken place in the case in the main proceedings.”

“In the light of all the foregoing, the answer to the third question must be that, for the purposes of ... Regulation No 2988/95, an irregularity is continuous or repeated where it is committed by a Community operator who derives economic advantages from a body of similar transactions which infringe the same provision of Community law. The fact that the irregularity relates to a relatively small proportion of all the transactions carried out in a given period and that the transactions in which the irregularity has been detected always concern different consignments is immaterial in this respect.” [¶¶ 38‑44]

On those grounds, the Court of Justice (First Chamber) hereby rules: “1. In proceedings for the withdrawal and recovery of differentiated export refunds which have been definitively paid on the basis of Commission Regulation (EEC) No 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products, a finding that those refunds have been wrongly paid must be substantiated by evidence of abuse on the part of the exporter, furnished in accordance with the rules of national law.”

“2. For the purposes of the second subparagraph of Article 3(1) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests, an irregularity is continuous or repeated where it [is] committed by a Community operator who derives economic advantages from a body of similar transactions which infringe the same provision of Community law. The fact that the irregularity relates to a relatively small proportion of all the transactions carried out in a given period and that the transactions in which the irregularity has been detected always concern different consignments is immaterial in this respect.”

Citation: Vonk Dairy Products BV v. Productschap Zuivel, Case C‑279/05; Celex No. 605JO279 (Eur. Ct. Just. (1st Chamb.) 2007).

HABEAS CORPUS

In petition by U.S. citizen sentenced to death by Central Criminal Court of Iraq, District of Columbia Circuit finds that U.S. citizenship, without more, is not enough to confer habeas corpus jurisdiction where conviction was handed down by non‑U.S. court

The Central Criminal Court of Iraq (CCCI) convicted Mohammad Munaf (Petitioner), a naturalized U.S. citizen, of kidnapping and sentenced him to death. The CCCI found that Petitioner had conspired with others in Iraq to kidnap three Romanian journalists for whom he was serving as guide and interpreter. He is currently in the custody of U.S. military forces at Camp Cropper (near Baghdad) which serve as part of the Multi‑National Force‑ Iraq (MNF‑I).

Petitioner filed for habeas corpus in the District of Columbia federal court, but the Court dismissed for lack of jurisdiction. Petitioner appealed. The U.S. Court of Appeals for the District of Columbia Circuit affirms, based on Hirota v. MacArthur, 338 U.S. 197 (1948) (U.S. military tribunal in Japan not U.S. tribunal), as applied by this Circuit in Flick v. Johnson, 174 F.2d 983 (D.C. Cir. 1949) (military tribunal in Germany not U.S. court) and recently interpreted by Omar v. Harvey, 479 F.3d 1 (D.C. Cir. Feb. 9, 2007).

In this case, the Circuit Court rules that Hirota and Flick control. The MNF‑I is a multi‑national force, authorized by the U.N. Security Council that operates in Iraq in cooperation with the Iraqi Government. The CCCI is an Iraqi criminal court administered by the Iraqi Government. Because it is not a U.S. tribunal, the District Court does lack jurisdiction to hear Petitioner’s habeas case.

“Munaf contends that Hirota and Flick do not control because, like Omar and unlike the petitioners in Hirota and Flick, Petitioner is a U.S. citizen. ... But [Petitioner’s] citizenship does not take his case out of the ambit of Hirota and Flick. Hirota did not suggest any distinction between citizens and noncitizens who were held abroad pursuant to the judgment of a non‑U.S. tribunal. Indeed, Justice Douglas wrote a separate opinion criticizing the Hirota majority for seeming to foreclose habeas review even for American citizens held in such circumstances. See id. at 204‑05 (Douglas, J., concurring) (1949).”

“In Omar, we held that ‘the critical factor in Hirota was the petitioners’ convictions by an international tribunal.’ ... We explained that, because Hirota ‘articulates no general principle at all,’ the decision is controlling as a matter of precedent if the circumstances important to the Court’s decision are present here. ... As in Hirota, [Petitioner’s] case involves an international force, detention overseas, and a conviction by a non‑U.S. court. As we noted in Omar, conducting habeas proceedings in the face of such a conviction risks judicial second‑guessing of a non‑U.S. court’s judgments and sentences, and we explained that Hirota’s repeated references to the petitioners’ sentences ‘ demonstrate[] that the Court’s primary concern was that the petitions represented a collateral attack on the final judgment of an international tribunal.’ ...”

“Whether a habeas petition represents a collateral attack on a conviction by a non‑U.S. court is not dependent on the petitioner’s citizenship. In light of the precedent established by Hirota, specifically as interpreted in Flick and Omar, American citizenship cannot displace the fact of a criminal conviction in a non‑United States court and permit the district court to exercise jurisdiction over [Petitioner’s] habeas petition.” [Slip op. 3] While Hirota may not be a particularly compelling case, it should be left to the U.S. Supreme Court to overrule or modify its own case precedent.

Citation: Munaf v. Geren, 482 F.3d 582 (D.C. Cir. 2007).

HUMAN RIGHTS (PROPERTY)

In case filed against Portugal by Budweiser (U.S.), European Court of Human Rights rules that Portuguese courts had accorded fair treatment to contentions by Budweiser and its Czechoslovakian respondent as to which party was entitled to copyright protection of name “Budweiser” under Portuguese law and treaty with Czechoslovakia

On January 11 last, the European Court of Human Rights (ECHR) ruled against Budweiser (U.S.) (Applicant) on a copyright matter. The Court held, by 15 votes to two, that, in ruling against Applicant, the Portuguese courts did not breach Article 1 of Protocol 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms [312 U.N.T.S. 221, E.T.S. 5, in force Sept. 21, 1970, as amended.] Its key provision is that “Every natural or legal person is entitled to the enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.” The property right at issue here is the Applicant’s “Budweiser” trade mark.

Applicant had contended that, under international law, trade mark protection becomes effective as of the date on which its owner filed its application to register. Therefore, the 1986 copyright treaty between Portugal and Czechoslovakia, as construed by the Portuguese courts, had deprived it of that right without compensation, despite the fact that there had been no public‑interest grounds to justify affording copyright protection to a registered Appellation of Origin.

The Court’s Grand Chamber disagreed. It noted at the outset that intellectual property as such does enjoy the protection of Article 1. That provision also applies to applications for the registration of trade marks, including the application in the case before it. The Applicant did own a bundle of proprietary rights recognized by Portuguese law, although they were revocable under certain conditions.

The question before the Court, therefore, was whether the decision to apply the provisions of the 1986 treaty to an application for registration of a mark which Applicant had filed in 1981 constituted an interference with the Applicant’s right to the peaceful enjoyment of its possessions.

The Court noted that the Applicant’s main complaint was about the way in which the Portuguese courts had applied its domestic and treaty law. The Court recalled that the Convention limits its function to ruling on whether the decisions by Member State courts were flawed by arbitrariness or were otherwise clearly unreasonable; it is not to second‑guess the rulings of Member State courts which are interpreting domestic law.

Absent any arbitrariness or manifest unreasonableness, the ECHR could not call into question either the findings of the Portuguese Supreme Court in its judgment of January 23, 2001 or that court’s reading of the bilateral agreement with Czechoslovakia. In ruling on the conflicting arguments of two private parties over the right to use the name “Budweiser” as a trade mark or Appellation of Origin, the Portuguese Supreme Court had ruled against the Applicant based on the material it considered relevant and sufficient to resolve the dispute, after hearing representations from the interested parties.

Accordingly, the ECHR concluded that the Supreme Court’s judgment did not constitute unlawful interference with the Applicant’s right to the peaceful enjoyment of its possessions and, therefore, there had been no violation of Article 1 of Protocol No. 1. Two Judges wrote a joint concurring opinion, and two Judges filed a joint dissenting opinion.

Citation: Anheuser‑Busch Inc. v. Portugal (Grand Chamber judgment of January 11, 2007; European Court of Human Rights) (summary by Court Registry on Monday, March 12, 2007 at 22:54:14. (The Court’s judgments are accessible on its Internet site: http://www.echr.coe.int.)

PATENTS

In patent infringement suit by AT&T against Microsoft, U.S. Supreme Court holds that Section 271(f) of U.S. Patent Act does not apply to Microsoft’s sending of its Windows operating system to foreign computer makers who make copies thereof and install these upon their computers for sale abroad since Microsoft was not supplying “components” of AT&T’s patented speech‑processing software abroad

Under U.S. patent law, no infringement generally occurs when someone makes and sells a patented product in another country. Section 271(f) of the Patent Act enacted in 1984, however, created an exception. Subdivision (1) provides that infringement does occur when one “suppl[ies] ... from the United States,” for “combination” abroad, the “components” of a patented invention.

This action between AT&T (Plaintiff) and Microsoft Corporation (Defendant) questions the applicability of Section 271(f) to computer software first sent from the U.S. to a foreign manufacturer on a master disk, or by electronic transmission, which the foreign recipient then copies so that it can install it on computers made and sold abroad.

Plaintiff holds a patent on a computer used to digitally encode and compress recorded speech. Defendant’s Windows operating system could potentially infringe that patent for Windows incorporates software code that, when installed, makes it possible for a computer to process speech in the manner claimed by the patent.

Defendant sells Windows to foreign manufacturers who install the software onto their computers. Either on a disk or by encrypted electronic transmission, Defendant sends each manufacturer a master version of Windows, which the manufacturer uses to make copies. The foreign manufacturer installs those copies (not the master version sent by Microsoft) on its computers. The foreign‑made computers are then marketed to users abroad.

In an infringement suit, Plaintiff alleged that Defendant is liable to it for the foreign installations of Windows. Its theory is that, by forwarding Windows to foreign manufacturers, Defendant “supplie[d] ... from the United States,” for “combination” abroad, “components” of Plaintiff’s patented speech‑processing software. Thus, it was liable under Section 271(f) of the Act.

Defendant disagreed. It argued that it makes no sense to classify unincorporated software as a “component” of an invention under Section 271(f) since it constitutes intangible information. Defendant also urged that the foreign‑generated copies of Windows actually installed abroad were not “supplie[d] ... from the U.S.” Unpersuaded by these responses, the District Court held Defendant liable under Section 271(f), and a divided Federal Circuit panel affirmed.

On a grant of certiorari, the U.S. Supreme Court, on April 30, 2007, reverses the lower courts in a 7 to 1 vote. Because Defendant does not export from the U.S. the copies of Windows installed on the foreign‑made computers in question, it does not “suppl[y] ... from the United States” “components” of those computers, and therefore is not liable under Section 271(f) as now couched.

A copy of Windows, not Windows in the abstract, qualifies as a “component” under Section 271(f). The provisions attach liability to the supply abroad of the “components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components.” Section 271(f)(1) (emphasis added).

The provision thus applies only to “such components” as are combined to form the “patented invention” at issue – here, Plaintiff’s speech – processing computer. Until expressed as a computer‑readable “copy,” (e.g., on a CD‑ROM) Windows – indeed any software detached from an activating medium – remains uncombinable. It cannot be inserted into a CD‑ROM drive or downloaded from the Internet; it cannot be installed or executed on a computer.

Abstract software code is a disembodied idea and as such, it does not match Section 271(f)’s categorization: “components” amenable to “combination.” Like a blueprint, Windows abstracted from a tangible copy no doubt is valuable information – a detailed set of instructions. A blueprint may exactly describe how to build and combine the components of a patented device, but it is not itself a combinable “component.”

While competent individuals can easily encode software instructions onto a computer‑readable medium, this fact does not lead to a different answer. The step of producing a copy is what makes software a usable, combinable part of a computer; whether or not it is easy, this extra step is vital. For instance, mechanics may cheaply use a variety of tools to generate the parts of a device. Those tools do not, however, become, “components” of the devices in which the parts are incorporated, at least not in any ordinary use of the term “component.”

Of course, Congress could have embraced within the scope of Section 271(f) not only a patented invention’s combinable “components,” but also “information, instructions, or tools from which those components readily may be generated.” It has not done so.

Under the wording of Section 271(f), the original parts supplied from the U.S. (and not foreign‑made copies thereof) actuate liability when assembled abroad to form the patented invention at issue. While copying software abroad is indeed cheap and easy, we can say the same about other items, such as keys copied from a master. Nothing in Section 271(f) instructs us to measure when duplication is easy and cheap enough to transmogrify a copy in fact made abroad into one “supplie[d] ... from the United States.” The statutory text says nothing about copying; this weighs against having judges come up with the idea that the replication abroad of a master dispatched from the U.S. somehow amounts to supplying the foreign‑made copies from this country.

As the majority opinion reasons: “[a]ny doubt that [Defendant’s] conduct falls outside Section 271(f)’s compass would be resolved by the presumption against extraterritoriality. ... The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.”

“The traditional understanding that our patent law operate [s] only domestically and d[oes] not extend to foreign activities, ... is embedded in the Patent Act itself, which provides that a patent confers exclusive rights in an invention within the United States. 35 U.S.C. Section 154(a)(1) (patentee’s rights over invention apply to manufacture, use, or sale ‘throughout the United States’ and to importation ‘into the United States’). See Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 531 (1972) (‘Our patent system makes no claim to extraterritorial effect’; our legislation ‘d[oes] not, and [was] not intended to, operate beyond the limits of the United States, and we correspondingly reject the claims of others to such control over our markets’).”

“As a principle of general application, moreover, we have stated that courts should ‘assume that legislators take account of the legitimate sovereign interests of other nations when they write American laws.” F. Hoffmann‑La Roche Ltd. v. Empagran S. A., 542 U.S. 155, 164 (2004); see EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991). Thus, [as] the United States accurately conveyed in this case: ‘Foreign conduct is [generally] the domain of foreign law,’ and in the area here involved, in particular, foreign law ‘may embody different policy judgments about the relative rights of inventors, competitors, and the public in patented inventions.’ Brief for United States as Amicus Curiae 28.”

“Applied to this case, the presumption tugs strongly against construction of Section 271(f) to encompass as a ‘component’ not only a physical copy of software, but also software’s intangible code, and to render ‘supplie[d] ... from the United States’ not only [to] exported copies of software, but also [to] duplicates made abroad.”

“[Plaintiff] argues that the presumption is inapplicable because Congress enacted Section 271(f) specifically to extend the reach of United States patent law to cover certain activity abroad. But as this Court has explained, ‘the presumption is not defeated ... just because [a statute] specifically addresses [an] issue of extraterritorial application,’ Smith v. United States, 507 U.S. 197, 204 (1993); it remains instructive in determining the extent of the statutory exception. See Empagran, 542 U.S., at 161‑162, 164‑165; Smith, 507 U.S., at 204.” [Slip op. 10].

“[Plaintiff] alternately contends that the presumption holds no sway here given that Section 271(f), by its terms, applies only to domestic conduct, i.e., to the supply of a patented invention’s components ‘from the United States.’ Section 271(f)(1). [Plaintiff’s] reading, however, ‘converts a single act of supply from the United States into a springboard for liability each time a copy of the software is subsequently made [abroad] and combined with computer hardware [abroad] for sale [abroad.]’ Brief for United States as Amicus Curiae 29.”

“In short, foreign law alone, not United States law, currently governs the manufacture and sale of components of patented inventions in foreign countries. If [Plaintiff] desires to prevent copying in foreign countries, its remedy today lies in obtaining and enforcing foreign patents. See Deepsouth, 406 U.S., at 531. [We note that Plaintiff] has secured patents for its speech processor in Canada, France, Germany, Great Britain, Japan, and Sweden. [Id. at note 17]. ...”

“[Plaintiff] argues that the presumption is inapplicable because Congress enacted Section 271(f) specifically to extend the reach of United States patent law to cover certain activity abroad. But as this Court has explained, ‘the presumption is not defeated ... just because [a statute] specifically addresses [an] issue of extraterritorial application,’ Smith v. United States, 507 U.S. 197, 204 (1993); it remains instructive in determining the extent of the statutory exception. See Empagran, 542 U.S., at 161‑162, 164‑165; Smith, 507 U.S., at 204.” [Slip op. 11]

The Court admits that reading Section 271(f) to bar foreign‑made copies of software from patent coverage may create a loophole in favor of software makers, but the Court is not convinced that a dynamic judicial interpretation of Section 271(f) would be appropriate here. The loophole is for Congress to weigh and to patch up if it finds such action warranted. Historically, Section 271(f) responded directly to a gap in U.S. patent law turned up by Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518 ( 1972). In that case, the items exported were kits containing all the physical, readily assemblable parts of a machine (not an intangible set of instructions); foreign buyers would combine those parts abroad themselves (not foreign‑made copies of them). Having filled that hiatus, Congress did not take on other arguable gaps, such as the lacuna this Plaintiff describes.

Given the expanded extraterritorial thrust Plaintiff’s reading of Section 271(f) would entail, the Court decides to leave the patent‑protective determination Plaintiff desires to Congress. Cf. Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 431 ( 1984). No doubt Congress is aware of the ease with which anyone can copy electronic media such as software and, indeed, has not left these problems untouched. See the Digital Millennium Copyright Act, 17 U.S.C. Section 1201 et seq. Even if patent law should better adapt to the realities of software distribution, it is healthier for the judiciary to eschew forecasting Congress’ probable future disposition of this matter. Instead, Congress itself should decide whether to make any statutory changes based on focused legislative consideration.

Citation: Microsoft Corporation v. AT&T Corporation, 127 Sup. Ct. 1746; 2007 WL 1237838 (2007).

WORLD TRADE ORGANIZATION

WTO Appellate Body issues compliance report in U.S.‑Argentina dispute criticizing aspects of U.S. anti‑dumping measures on oil country tubular goods from Argentina

In the original WTO proceeding about anti‑dumping duties on oil country tubular goods (OCTGs) from Argentina, Argentina complained about several aspects of the “sunset” review conducted by the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) of the anti‑dumping duty order on OCTG products from Argentina. Under the sunset review, DOC and ITC conduct reviews no later than five years after it has issued an antidumping or countervailing duty order to determine whether revoking the order would be likely to lead (1) to the continuation or recurrence of dumping or subsidies of concern to DOC and (2) to the material injury which the ITC handles.

The disputed U.S. measures had to do with the waiver of an exporter’s right to take part in the review carried out by the DOC. At the time, there existed two types of waivers: (a) the so‑called “affirmative waiver” where the exporter explicitly waives its right to be a party to under Section 751(c)(4)(A) of the U.S. Tariff Act of 1930, [19 U.S.C. Section 1675]; and (b) the so‑called “deemed waiver”where the exporter, through silence or failure to submit a response, is deemed to have waived its right to be in on the proceeding under 19 C. F. R. Section 351.218(d)(2)(iii).

U.S. law requires federal agencies determine the likelihood of dumping for sunset review purposes on an “order‑wide” basis. An individual respondent may waive participation in the proceeding under Section 751(c)(4)(A). The result is that the agency will enter an affirmative finding of probable dumping for that company under Section 751(c)(4)(B).

In its original sunset review, DOC had based its affirmative likelihood‑of‑dumping determination on two bases: First, that dumping had continued over the life of the anti‑dumping order and, second, that import volumes had declined after the anti‑dumping order.

The WTO agreed with Argentina that certain provisions of U.S. law dealing with waivers in sunset reviews and certain provisions of the Sunset Policy Bulletin (SPB) on the DOC’s obligation to determine the likelihood of continuation or recurrence of dumping in sunset reviews, do not square with the Anti‑Dumping Act. On October 28, 2005, the DOC’s International Trade Administration issued a final rule amending 19 C.F.R. Part 351. See 70 Fed. Reg. 62061.

Dissatisfied with U.S. compliance, Argentina sought recourse under Article 21.5 of the Dispute Settlement Understanding as to whether government measures do comply with WTO trading rules. Argentina challenged the U.S. compliance under the WTO Anti‑Dumping Agreement and the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement).

A WTO Panel issued its report on November 30, 2006 (WT/DS268/RW). It found that certain waiver provisions under the Tariff Act remain inconsistent with the rules for sunset reviews laid down by Article 11.3 of the Anti‑Dumping Agreement. The DOC acted inconsistently with Article 11.3 of this Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue.

In its report, the Appellate Body reverses the Panel’s finding that Section 751(c)(4)(B) of the Tariff Act, in conjunction with Section 751(c)(4)(A) and Section 351.218(d)(2) of the Regulations, is inconsistent with Article 11.3 of the Anti‑Dumping Agreement. Secondly, it approves the Panel’s finding that the DOC’s volume analysis was properly before the Panel. Finally, it agrees with the Panel’s finding that the DOC did not fail to carry out U.S. obligations under Articles 11.3 and 11.4 of the Anti‑Dumping Agreement by developing a new factual basis pertaining to the original review period for its Section 129 determination.

Citation: United States ‑ Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina (WT/DS268/AB/RW) (12 April 2007). The full report is available on the website www.wto.org.

EU and U.S. sign comprehensive Air Transport Agreement. On April 30 last, the U.S. and the EU signed a comprehensive, first‑stage Air Transport Agreement (ATA) that will bring significant economic benefits to America and Europe. The ATA will replace existing bilateral agreements between the U.S. and EU Member States and set up an “Open‑Skies Plus” framework between the U.S. and all 27 EU Member States. Under the ATA, every U.S. and every EU airline will be authorized (1) to fly between every city in the EU and every city in the U.S.; (2) to operate without restriction on the number of flights, aircraft, and routes; (3) to set fares according to market demand; and (4) to enter into cooperative arrangements, including codes haring, franchising, and leasing. In addition, the ATA will enhance regulatory cooperation in areas as varied as competition law, government subsidies, the environment, consumer protection, and security. The ATA also includes important measures dealing with investment. It allows U.S. citizens to invest in an E.C. airline, as long as a Member State and/or nationals of Member States have a majority ownership and effective control of the airline. The Agreement makes clear that, under U.S. law, EU investors may hold up to 49.9 % of the total equity in a U.S. airline and, on a case‑by‑case basis, even more, provided that foreign nationals do not own more than 25% of the voting stock and that U.S. citizens actually control the airline. Finally, the grant of new traffic rights to EU carriers opens the door to cross‑border airline mergers and acquisitions within the EU, which is possible today only if airlines are prepared to place their international operating rights in legal jeopardy. There are other benefits not listed here. The EU Transport Council approved the ATA on March 22, 2007. It is to be provisionally applied starting March 30, 2008, and calls for U.S.‑EU negotiations on a second stage of aviation liberalization to start within two months of that date. Citation: Fact Sheet #2007/340, U.S. Department of State, Office of the Spokesman, Washington, D.C.; released , Monday, April 30, 2007.

EU imposes provisional anti‑dumping duty on U.S. peroxosulphates. After receiving a complaint from the European Chemical Industry Council (CEFIC) in May 2006, the Commission of the European Union began an investigation of imports of peroxosulphates (persulphates) from the U.S., China and Taiwan. The chemical, paper and textile industries commonly use these chemicals as initiators and oxidizing agents. The affected U.S. producers are E. I. DuPont de Nemours and FMC Corporation. For these producers, the Commission established a Dumping Margin of 28.3 % and 84.1 % respectively. The corresponding provisional duty rates are 10.6 % and 39 % respectively. Citation: Commission Regulation (EC) No 390/2007, 2007 O. J. of the European Union (L 97) 6, April 12, 2007.

Australia cancels visa of well‑known rapper. On April 25 last, Australian authorities announced that they have canceled the visa of Calvin Broadus, (better known as “Snoop Dogg”) because of his long criminal history. He was supposed to host the MTV Australia Video Music Awards in Sydney. Immigration Minister, Kevin Andrews, declared that the rapper apparently is still associated with a Los Angeles gang which has gotten involved in murder, robberies and drug dealing. A California court recently sentenced Mr. Broadus on felony gun and drug charges. He also has a 1990 conviction for possessing cocaine. The rapper now has twenty‑eight days to protest the visa decision. Citation: The Associated Press (online), Sydney, Australia, Wednesday, April 26 at 03:35:24Z.

Some U.S. beef is reappearing in South Korean market. Beef from the U.S. has made important progress in its efforts to reappear in South Korean restaurants after a ban of more than three years due to fears of mad cow disease (Bovine Spongiform Encephalopathy). Korean authorities banned bone chips for potentially harboring BSE. The presence of such chips in U.S. beef had foiled three prior attempts by U.S. exporters to recover their access to the profitable Korean market. The National Veterinary Research & Quarantine Service reportedly found no chips in the 14,100‑pound shipment which arrived Monday from a Kansas meat packer. South Korea, Japan and other countries had banned the import of U.S. beef after instances of mad cow disease turned up in the U.S. in December 2003. BSE is allegedly linked to the rare but fatal variant known as Creutzfeldt‑Jakob disease found in humans. After long and hard negotiations, South Korea agreed last year to resume imports of U.S. beef, but only of boneless meat from cattle younger than 30 months. According to the U.S. Meat Export Federation, the U.S. had exported beef worth US$813.2 in 2003 before the ban went into effect, for a 68% market share. At the time, South Korea was the third‑largest world market for U.S. beef, after Japan and Mexico. Citation: The Associated Press (online), Seoul, South Korea; Thursday, April 26, 2007 at 03:20:44Z (byline of Kelly Olsen, AP Business Writer, with contributions from AP writer, Kwang‑Tae Kim).

Global coalition against nuclear terrorism acquires three new members. On July 15, 2006, in St. Petersburg, Russia, President Bush and President Putin launched The Global Initiative to Combat Nuclear Terrorism. Its goal is to expand and accelerate the development of partnership capacity to combat the global threat of terrorism through nuclear weapons on a determined and systematic basis. On May 14, 2007, the U.S. Department of State announced that Israel, Afghanistan and Sri Lanka have joined the Initiative. The other 29 members include Armenia, Australia, Cambodia, Canada, Cape Verde, China, Cyprus, Czech Republic, Denmark, France, Germany, Georgia, Greece, Italy, Japan, Kazakhstan, Macedonia, Montenegro, Morocco, Netherlands, Palau, Romania, Russian Federation, Spain, Switzerland, Turkey, Ukraine, United Kingdom and the United States. The United Nations nuclear watchdog group, the International Atomic Energy Agency has accepted the coalition’s invitation to attend Initiative sessions as an Observer. Citation: Media Note #2007/396, U.S. State Department, Office of Spokesman, Washington, D.C., Monday, May 14, 2007.