2009 International Law Update, Volume 15, Number 7 (July)

2009 International Law Update, Volume 15, Number 7 (July)

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

EXTRADITION

On reviewing U.S. conviction of Colombian drug trafficker, Eleventh Circuit refuses to apply Rule of Specialty in absence of proof that rendition occurred based on 1979 Extradition Treaty between U.S. and Colombia and its specialty clause

Joaquin Valencia‑Trujillo (Appellant) successfully organized and operated an international drug smuggling organization. The joint operation of several drug enforcement agencies under the code name “Panama Express,” terminated this business (as well as many others). These enforcement moves resulted in more than 1,200 convictions and in the seizure of over 600 tons of cocaine.

In March 2003, the U.S. requested Columbia to render Appellant to the U.S. and provided supporting information. In February 2004, the Supreme Court of Justice of Colombia advised the Colombian Ministry of the Interior and Justice that Columbian law did authorize Appellant’s extradition on all four counts in the underlying U.S. indictment. Columbian authorities arrested Appellant and had him transported to the U.S.

A federal court convicted him of several drug offenses. On appeal, he raises the issue of “specialty” in the law of international extradition. This generally requires that the receiving nation try the extraditee on the same charges on which the rendering nation had sent him to the U.S. He fails to persuade the U.S. Court of Appeals for the Eleventh Circuit, however, which affirms his convictions.

The Appeals court explains its bases as follows. “The rule of specialty ‘stands for the proposition that the requesting state, which secures the surrender of a person, can prosecute that person only for the offense for which he or she was surrendered by the requested state or else must allow that person an opportunity to leave the prosecuting state to which he or she had been surrendered.’ United States v. Gallo‑Chamorro (Gallo‑Chamorro I), 48 F.3d 502, 504 (11th Cir. 1995) ... The rule is grounded in concerns of international comity. ... As we have explained, ‘[b]ecause the surrender of the defendant requires the cooperation of the surrendering state, preservation of the institution of extradition requires that the petitioning state live up to whatever promises it made in order to obtain extradition.’ Id.” [Slip op. 1]

“Here, Appellant was extradited, but the [Columbian] Ministry of the Interior and Justice clarified that it was just for actions performed after December 17, 1997, the date on which extraditions of Colombian citizens was [first] allowed. Once in the U.S., Appellant filed ‘Defendant’s Motion to Enforce Rule of Specialty,’ claiming that the district court had to redact from the indictment all references to events occurring before December 17, 1997.”

“The district court did redact the first 26 listed predicate acts accordingly, and took ... measures to prevent the jury from improperly considering events before December 17, 1997 ... The jury specifically found that Appellant had committed all of the conspiracy crimes in the four Counts after December 17, 1997.”

The Court next focuses on the issue of standing. Appellant claims to have been extradited under the Extradition Treaty with the Republic of Colombia, U.S.‑Colom., September 14, 1979, S. Treaty Doc. No.97–8). It entered into force March 4, 1982 and expressly provides for the Rule of Specialty.

“The problem for Valencia‑Trujillo is that he has not established that he was extradited under [the] United States‑Colombia extradition treaty. In asserting that he was, [Appellant] relies heavily on a 1999 State Department Memorandum from the American Embassy in Colombia to the U.S. Secretary of State and Department of Justice. That memorandum states that most extraditions from Colombia to the United States occur by treaty and are done according to a particular set of procedures, which include a provisional arrest followed by a request for extradition.”

“Those procedures for the ‘well‑established, treaty‑based extradition of Colombian citizens to the United States’ mirror the procedures followed during [Appellant’s] extradition, including the use of the diplomatic note and the submission of affidavits by the [Assistant U.S. Attorney] AUSA and the case agent. [Appellant] highlights the memorandum’s statement that extradition between the United States and Colombia ‘is governed’ by the 1979 treaty, and he notes that the ‘meaning attributed to treaty provisions by the Government agencies charged with their negotiation and enforcement is entitled to great weight,’ see Gandara v. Bennett, 528 F.3d 823, 829 n.3 (11th Cir. 2008).”

“Although the State Department memorandum says that it is ‘unlikely’ that the Colombian government would use different procedures from those it describes, it does contemplate that extraditions can occur outside of the 1979 Treaty. The most that the State Department memorandum establishes is that extraditions from Colombia to the United States are generally governed by the 1979 Extradition Treaty, and that [Appellant] was extradited through procedures consistent with those used under the treaty. The memorandum does not, however, establish that [Appellant] was actually extradited under the treaty.”

“The diplomatic note that was sent by the American Embassy to Colombia invokes the Colombian Constitutional amendment, the Criminal Procedure Code and applicable international law principles. It conspicuously does not invoke or even mention the 1979 Colombia‑United States Treaty, and [Appellant] has pointed to no part of his extradition documents that does.” [Slip op. 13‑14]

The Court then explains more generally that the rule of specialty applies only to extraditions pursuant to treaty language that requires it. “[A] country is under no legal obligation to surrender a fugitive to another country as a matter of international law. ... Instead, countries broaden the reach of their criminal justice systems by entering into extradition treaties, which are cooperative agreements between two governments for the prosecution and punishment of criminals. Those treaties typically specify the offenses for which extradition will be granted. ...”

“When the surrendering country receives an extradition request, it may decide to grant extradition only for the offenses covered by the treaty and that is where the rule of specialty comes in. The rule ‘provides the surrendering nation with a means of ensuring compliance with this aspect of the extradition treaty, and reflects a fundamental concern of governments that persons who are surrendered should not be subject to indiscriminate prosecution by the receiving government.’ ... Thus, the rule of specialty is treaty‑based.” [Slip op. 18] See United States v. Puentes, 50 F.3d 1567 (11th Cir. 1995).

Because not all informal extradition agreements are pursuant to treaties, they do not become part of the internal law of this country. See U.S. Const. art. VI., cl. 2. Moreover, not all formal treaties give defendants [private] rights which they can enforce in the courts of this country.

“As the Supreme Court recently explained: ‘A treaty is, of course, primarily a compact between independent nations. It ordinarily depends for the enforcement of its provisions on the interest and the honor of the governments which are parties to it. If these interests fail, its infraction becomes the subject of international negotiations and reclamations. It is obvious that, with all this, the judicial courts have nothing to do and can give no redress. Only if the treaty contains stipulations which are self‑executing, that is, require no legislation to make them [domestically] operative, will they have the force and effect of a legislative enactment.’” [Slip op. 19‑20]

Citation: United States v. Valencia‑Trujillo, 573 F.3d 1171 (11th Cir. 2009).

JURISDICTION (CONTRACT CLAUSES)

In interpreting jurisdiction clauses in complex contract litigation over collateralized debt obligations where one party has sued in New York courts and opposing party has invoked jurisdiction of English courts over similar issues, Court of Appeal (Civil Division) upholds lower court’s ruling that rejected resort to English courts

This appeal turns on the construction of jurisdiction clauses. The principal issue is whether the English jurisdiction clause in one of the documents recording the complex transaction between the parties applies to the claims in the action in England for the negative declaration. The English court of first instance concluded that it did not.

This dispute concerns derivatives in relation to the property market, or Collateralized Debt Obligations (CDOs). The contractual documentation in this matter consists of more than 500 pages; its size and complexity, which is no doubt duplicated in many other transactions, make it easier to understand, if not to excuse, why many senior banking figures throughout the world had little understanding of this market and of the very high risks their institutions were undertaking.

HSH Nordbank AG (HSH) is a commercial bank incorporated in Germany with dual headquarters in Hamburg and Kiel. The first claimant, UBS AG, is incorporated in Switzerland, where it has its head office, and has substantial offices worldwide, including in New York and London.

The second claimant, UBS Securities LLC (UBS LLC), is an affiliate of UBS. It is incorporated in the United States and has its principal place of business here. The appellate court generally refers to either or both of them as “UBS.”

The relevant transactions took place in 2002/2003 between UBS and LB Kiel. HSH has assumed all material assets, rights and obligations of LB Kiel, and it is in that capacity that HSH has sued UBS in New York state court and is being sued by UBS in England. HSH is domiciled in Germany for the purposes of Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels I Regulation).

UBS filed its English action for negative declaratory relief against HSH on February 25, 2008, in anticipation of proceedings which HSH was going to lodge against UBS in New York later the same day. In its complaint, HSH alleged mis‑selling and mismanagement of the securities which were the subject of the complex arrangements between the parties. The original complaint relied on the following causes of action: breach of contract; fraud; negligent misrepresentation; breach of fiduciary duty; breach of an implied covenant of good faith and fair dealing; unjust enrichment; and constructive trust.

The only possible basis for the jurisdiction of the English court is the jurisdiction clause in one of the agreements in the CDO transaction. HSH applied in the English proceedings for an order that the English court had no jurisdiction to try UBS’s claim in the English proceedings. In the alternative, HSH asked the court to stay any exercise jurisdiction on forum non conveniens grounds. The Judge below decided that the English court did not have jurisdiction in respect of the claims made in the English proceedings, and that there was no need to rule on the alternative application for a stay.

The only point of the English proceedings is to pre‑empt any decision of the New York court in the proceedings brought there by the Defendants in the English proceedings. If the relevant claims (for fraudulent and negligent misrepresentation) in the New York proceedings do not stand, the English proceedings become pointless. UBS moved the New York court for an order (1) dismissing the complaint on substantive grounds, and alternatively (2) dismissing or staying the action on jurisdictional grounds.

The New York judge acceded in part to UBS’s motion to dismiss. HSH, however, has revived some of the relevant claims in an amended complaint; that is itself the subject of a further motion to dismiss by UBS on the ground of the res judicata effect of the New York court’s prior judgment. . That court has heard – but not yet decided – that motion.

Kiel wished to invest in real estate related credit and asset backed securities. At the time of the transaction in March 2002, the market evaluated these as outperforming similarly rated corporate securities. As a result, LB Kiel invested in a multiple tranche synthetic CDO. [tranche means “slice” in French].

A CDO is a financial structure at the center of which a special purpose vehicle (SPV) issues tranches of debt securities, the performance of which is linked to a portfolio of assets. The SPV may either hold the underlying assets (a cash CDO) or accept exposure to assets such as corporate bonds or asset‑backed securities via a credit default swap (CDS) with a financial counterparty (a synthetic CDO). The performance of CDOs is linked or “referenced” to the pool of underlying bonds or securities, the “Reference Pool”.

In a synthetic CDO, the issuer may (as in the present case) invest the proceeds of CDOs issued in a portfolio of high quality, typically AAA‑rated assets (collateral); investors use those collateral assets to generate income to make coupon (interest) payments on the CDOs. In the case of a default of any of the Reference Pool to which the SPV is exposed, it serves to pay the financial counter party the loss due under the CDS. On each occasion on which one of the assets in the Reference Pool defaults or is subject to some other credit event (such as a downgrading of its credit rating), then a payment becomes due from the SPV to the financial institution under the CDS.

At the same time, the default correspondingly reduces the principal and interest due from the SPV to the CDO note holder. CDO notes are usually issued in different classes, as a means of allocating the losses sequentially commencing with the most “junior” tranche of notes. When the original principal amount of such class of notes are written down to zero, and then losses are allocated to the next “higher” tranche of notes, until the entire capital structure is exhausted or the maturity date of the CDO notes occurs.

In actively managed CDOs, one of the parties to the transaction commonly has the right to alter the composition of the Reference Pool. Such a right potentially increases the risk for the holder of the CDO note. This is particularly true if the party with the right to alter the composition of the Reference Pool has an economic interest in the transaction, as in the present case.

In this case UBS set up the SPV as the financial institution under the CDS while LB Kiel was the original holder of the CDO Notes issued by the SPV. The SPV used for the issue of the credit linked notes was a Cayman Islands [in West Indies] company set up by UBS called North Street Referenced Linked Notes, 2002‑4 Ltd (NS4). NS4 issued three categories of notes in U.S. dollars. The first category comprised $500 million of floating rate notes of classes A to D (the NS4 Notes). LB Kiel received the NS4 Notes which provided credit protection to UBS against certain credit risks in relation to the Reference Pool; it amounted to a pool of international assets selected by UBS with an emphasis on U.S. commercial and residential real estate backed bonds and other asset‑backed securities,.

The CDS with NS4 gave UBS the right to alter the Reference Pool within certain parameters. The effect was that LB Kiel provided credit protection to UBS in the event of defaults which would result in reductions in the principal amounts of the NS4 Notes.

UBS was the manager responsible to allocate and substitute assets in the Reference Pool. It was also the direct recipient of any payments from the SPV due to credit events in respect of securities in the Reference Pool. Accordingly, in order to protect LB Kiel, LB Kiel and UBS joined the Reference Pool Side Agreement (RPSA) as a condition of buying the CDO Notes. The RPSA created obligations for UBS in connection with UBS’s management, selection, and substitution of securities in the Reference Pool. In return, LB Kiel issued to UBS $500 million of puttable (i.e. redeemable on certain conditions) medium term notes (the Kiel MTN Notes) under LB Kiel’s existing MIN program.

There had for some years been in existence a program which had been agreed between LB Kiel and its Dutch subsidiary, LB Schleswig‑Holstein Finance BV (LB Finance’) and a group of banks (the Dealers), which included UBS. On September 11, 2001, the parties signed an amended and restated program agreement (the Program Agreement or PA). The PA set out terms and conditions which would apply if either LB Kiel or LB Finance agreed with any Dealer for the issue and purchase of notes.

The normal practice would then be for the Dealer to sell the Notes in the secondary market. An information memorandum also dated September 11, 2001 (the Information Memorandum or IM) set out the terms and conditions of Euro Notes. The Kiel MTN Notes fall within this category. Condition 19(a) provided that English law would govern the Notes. and by clause 19(b) there was a jurisdiction clause partially in these terms:

“The Issuer agrees, for the exclusive benefit of the Agents, the Noteholders, the Receiptholders and the Couponholders that the courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Agency Agreement, the Notes, the Receipts and/or the Coupons and that accordingly any suit, action or proceedings arising out of or in connection with the Agency Agreement, the Notes, the Receipts and the Coupons (together referred to as ‘ Proceedings’) may be brought in such courts.”

On January 23, 2002 UBS and LB Kiel signed a letter agreement (the Letter Agreement or LA). It confirmed the purchase by LB Kiel of what became the NS4 Notes subject to acceptable documentation. New York law was to govern the LA but it did not expressly deal with jurisdiction.

UBS and NS4 next entered into a credit swap. Under it, UBS bought credit default protection from NS4 with respect to the Reference Pool as described in the Offering Circular. English substantive law was to govern it and it contained a non‑exclusive English jurisdiction clause. The RPSA, however, was subject to New York law and contained a non‑exclusive New York jurisdiction clause.

On March 5 2002, LB Kiel issued to UBS $500 million of Kiel MTN Notes. They were redeemable in that the principal amount of each note with accrued interest would become payable to a note holder on any business day at the note holder’s option subject to written notice being given 5 business days in advance.

The other March 5 document was a “Dealer’s Confirmation” signed by UBS AG. It ended up with a jurisdiction clause which read: “Subject as provided in this sub‑clause (2), the parties hereby irrevocably agree that the courts of England are to have exclusive jurisdiction to settle any disputes which may arise out of, or in connection with, this Agreement and the parties accordingly submit to the exclusive jurisdiction of the English courts for any suit, action or proceedings arising out of, or in connection with, this Agreement (together referred to as Proceedings).”

After the court’s dismissal of most counts, HSH filed an Amended Complaint in the New York proceedings on December 10, 2008. There are now four causes of action in the New York complaint: (1) breach of the contract; (2) fraudulent misrepresentation; (3) negligent misrepresentation; (4) breach of the implied covenant of good faith and fair dealing.

On January 16, 2009, UBS moved to dismiss the misrepresentation claims in the Amended Complaint. The New York court heard the matter in April 2009 and that court should rule on it in the autumn.

Relying substantially on Article 23 of the Brussels I Regulation, the English Court of Appeal (Civil Division) dismisses the English appeal. It was common ground that HSH is domiciled in Germany for the purposes of the Brussels I Regulation, and that the only possible basis for jurisdiction in the English action is the jurisdiction clauses in the Dealer’s Confirmation and the Kiel MTN Notes But nothing turns on the jurisdiction clause in the Kiel MTN Notes, since they passed immediately to NS4. It is therefore the Dealer’s Confirmation which was the focus of the trial judge’s decision and of this appeal.

The question on this issue is whether the claims in the draft particulars of claim fall within the Dealer’s Confirmation jurisdiction clause, with the consequence that the English court has jurisdiction under Article 23 of the Brussels I Regulation. It provides that: ‘If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise.

In a unanimous affirmance of the court below, the Court of Appeal (Civil Division) explains its rationale. “UBS’s arguments [in this appeal] are essentially these. It accepts that a claim for post‑inception breaches of the RPSA would be outside the scope of the Dealer’s Confirmation jurisdiction clause. That would include the first and fourth causes of action in the amended New York complaint.”[¶ 56].

“The proper approach to the construction of clauses agreeing jurisdiction is to construe them widely and generously, and the words ‘arising out of’ or ‘in connection with’ apply to claims arising from pre‑inception matters such as misrepresentation.”

“The Dealer’s Confirmation jurisdiction clause had been specially renegotiated to provide expressly for the exclusive jurisdiction of the English court. If the parties had intended to give it a narrower scope, they would have done so. They must have envisaged the risk of a clash, and could have avoided it. The meaning of the clause is to be determined as at the time it was entered into and not by reference to later events .” [¶¶ 60‑61].

“In determining which contract a dispute arises from, or in connection with, in a multi‑contract situation, a degree of common sense is appropriate: ... The parties entered into different agreements for different aspects of an overall relationship, with different terms as to jurisdiction. All matters relating to the CDO Note, including the Note itself (as set out in the Indenture), the Letter Agreement and the RPSA, are [made expressly] subject to the laws of New York. All those agreements contain submissions to the jurisdiction of the courts of New York, except for the Letter Agreement, which is silent as to jurisdiction and would not entitle UBS to sue HSH in England.”

“The question on this part of the appeal is whether the claims in the English action fall within the jurisdiction agreement in the Dealer’s Confirmation. That question turns on whether, in the light of the complex documentation as a whole, the parties should be taken objectively to have intended by the jurisdiction clause in the Dealer’s Confirmation that, when a dispute arose as to whether the transaction as a whole was induced by fraudulent or negligent misrepresentation, the issue whether the issue and transfer of the Kiel MTN Notes was so induced should be subject to the exclusive jurisdiction of the English courts, while the question whether the conclusion of the other agreements was induced by the same alleged misrepresentations should be subject to the non‑exclusive jurisdiction of the New York courts. The claim form in the English proceedings makes no mention of the Dealer’s Confirmation.” [¶¶ 71‑73].

“Plainly the parties did not actually contemplate at the time of the conclusion of the contracts that there would be litigation in two countries involving allegations of misrepresentation in the inception and performance of the agreements. But, in my judgment, sensible business people would not have intended that a dispute of this kind would have been within the scope of two inconsistent jurisdiction agreements. The agreements were all connected and part of one package, and it seems to me plain that the result for which UBS contends would be a wholly uncommercial result and one that sensible business people cannot have intended.”

“It is fanciful to suppose (as UBS contends) that the Dealer’s Confirmation jurisdiction clause had been specially renegotiated to provide expressly for the exclusive jurisdiction of the English court to deal with disputes of this kind, or that the parties must have envisaged the risk of a clash.”

“The Dealer’s Confirmation is expressed to be issued pursuant to LB Kiel’s US$20 billion Global Medium Term Note Programme and simply confirms the issue of the US$500 Kiel MTN Notes to UBS as one of the dealers on HSH’s bond programme. UBS immediately transferred them to NS4. NS4 kept the Kiel MTN Notes as an investment or ‘collateral’ to create income in order to fund payments under the NS4 Notes.” [¶¶ 84‑86].

“The New York complaint alleges, inter alia, that (a) UBS induced HSH to purchase the NS4 Notes by misrepresentations concerning the credit quality of the Reference Pool to which payments under the NS4 Notes were linked; (b) UBS failed to operate a Commitments Committee, as required by the RPSA, so as to select Reference Pool assets with stable or improving credit profiles, carefully monitor the credit status and quality of each asset, and avoid downgrades. As Justice Lowe stated in his decision of October 21, 2008: ‘HSH’s overarching claim is that UBS failed to maintain the promised high quality of the notes in the Reference Pool, by failing to ensure that the Commitments Committee keep an eye on the condition of the investments.’” [¶ 89].

“Whether a jurisdiction clause applies to a dispute is a question of construction. Where there are numerous jurisdiction agreements which may overlap, the parties must be presumed to be acting commercially, and not to intend that similar claims should be the subject of inconsistent jurisdiction clauses. The jurisdiction clause in the Dealer’s Confirmation is a ‘boilerplate’ bond issue jurisdiction clause, and is primarily intended to deal with technical banking disputes. Where the parties have entered into a complex transaction, it is the jurisdiction clauses in the agreements which are at the commercial centre of the transaction which the parties must have intended to apply to such claims as are made in the New York complaint and reflected in the draft particulars of claim in England.” [¶ 95].

“The action in England is intended to mirror the New York proceedings. I have already emphasised that the essence of the claims for misrepresentation in New York is that HSH was induced to purchase the NS4 Notes in reliance on the fraudulent and negligent misrepresentations, and would not have purchased them in the absence of those representations. No sensible commercial interpretation of the jurisdiction clause in the Dealer’s Confirmation could have the result that identical misrepresentation claims would fall both within that clause and within the non‑exclusive New York jurisdiction clauses, simply because the consideration for the transaction was the issue of the Kiel MTN Notes.

In my judgment the standard form bond issue jurisdiction clause in the Dealer’s Confirmation does not apply to claims that the transaction as a whole, and in particular the purchase of the NS4 Notes, was induced by misrepresentation. I am satisfied that the judge’s decision [below] was right.”[¶ 97] Both of my colleagues agree with this opinion.

Citation: UBS AG v. HSH Nordbank AG, [2009] E.W.C.A. Civ. 585; 2009 WL 1657158 (June 18, 2009).

SOVEREIGN IMMUNITY

District of Columbia Circuit reverses dismissal of Plaintiff’s complaint involving 1984 murder of his grandfather, former Iranian Chief of Armed Forces, in Paris since choice‑of‑law factors require application of French law

Plaintiff, Amir Reza Oveissi is a U.S. citizen; he is the grandson of Gholam Oveissi, the former Chief of the Iranian Armed Forces until 1979. Members of the terrorist organization Hezbollah (a.k.a. Islamic Jihad) killed Gholam Oveissi in Paris in 1984.

In 2003, Amir Oveissi sued Iran and its Ministry of Information and Security (MOIS) in the District of Columbia federal Court alleging that they had funded and directed the Islamic Jihad. The District Court found that the Defendants were not entitled to sovereign immunity and were culpable in Gholam Oveissi’s murder. The court, however, rejected Plaintiff’s claims for intentional infliction of emotional distress (IIED) and wrongful death. Amir Oveissi appealed. The U.S. Court of Appeals for the District of Columbia Circuit reverses because the District Court conducted an erroneous choice‑of‑law analysis.

Since Defendants failed to appear in this lawsuit, the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602, requires the court itself to decide whether the Plaintiff has a right to relief. See 28 U.S.C. § 1608(e). Therefore, the District Court held a bench trial on that issue. The District Court concluded that the then‑applicable FSIA terrorism exception, § 1605(a)(7), removed Defendants’ immunity, and that Defendants would be responsible for Gholam Oveissi’s murder.

As for the claims of IIED and wrongful death, however, the District Court applied District of Columbia choice‑of‑law rules, deciding that the law of the Plaintiff’s domicile at the time of the acts at issue governs the claim. Because Amir Oveissi was born in California and had briefly resided there, the District Court applied California law, but ultimately concluded that he lacked standing. If Gholam Oveissi had survived the attack, he himself could not have sued under the FSIA terrorism exception, so neither could Plaintiff, his grandson, maintain such a lawsuit.

The Court of Appeals first reviews which choice‑of‑law rules and substantive law applies, then whether the District Court properly construed California law on a wrongful death claim by a deceased’s descendent.

On the choice‑of‑law issue, the Court points out that : “The FSIA does not contain an express choice‑of‑law provision. FSIA § 1606 does, however, provide that a foreign state stripped of its immunity ‘shall be liable in the same manner and to the same extent as a private individual under like circumstances.’ 28 U.S.C. § 1606. This section ensures that, if an FSIA exception abrogates immunity, plaintiffs may bring state law claims that they could have brought if the defendant were a private individual. ...”

“Relying on the language of §1606, the Second Circuit has held that courts considering issues governed by state substantive law in FSIA cases should apply the choice‑of‑law rules of the forum state. Barkanic v. Gen. Admin. of Civil Aviation of the People’s Republic of China, 923 F.2d 957, 959‑60 (2d Cir. 1991) ... As the Second Circuit persuasively reasoned, ‘[t]he goal of applying identical substantive laws to foreign states and private individuals . . . cannot be achieved unless a federal court utilizes the same choice of law analysis in FSIA cases as it would apply if all the parties to the action were private.’ Barkanic, supra at 959‑60.”

“The paradigm case involving choice‑of‑law issues and solely private parties is one brought under the federal courts’ diversity jurisdiction. See 28 U.S.C. § 1332. In such a case, the court would apply the forum state’s choice‑of‑law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). We thus agree with the Second Circuit that applying the forum state’s choice‑of‑law principles, rather than constructing a set of federal common law principles, better effectuates Congress’ intent that foreign states be ‘liable in the same manner and to the same extent as a private individual’ in FSIA actions. 28 U.S.C. §1606.2. In this case, the plaintiff’s causes of action for IIED and wrongful death are based solely on state substantive law, and the choice‑of‑law rules of the forum – the District of Columbia – therefore apply to those claims. ...” [Slip op.8‑10]

“To determine which jurisdiction’s substantive law governs a dispute, District of Columbia courts blend a ‘governmental interests analysis’ with a ‘most significant relationship’ test. Hercules & Co., Ltd. v. Shama Rest. Corp., 566 A.2d 31, 40‑41 & n.18 (D.C.C.A. 1989) ... To determine which jurisdiction has the most significant relationship to a case, a court must ‘consider the factors enumerated in the Restatement (Second) of Conflict of Laws § 145.’ Id. at 40.”

“The four Restatement factors are: (1) ‘the place where the injury occurred’; (2) ‘the place where the conduct causing the injury occurred’; (3) ‘the domicil[e], residence, nationality, place of incorporation and place of business of the parties’; and (4) ‘the place where the relationship, if any, between the parties is centered.’ Restatement (second) supra at §145(2) (1971).”

“In any given case, these considerations may point in opposite directions and raise difficult questions concerning how each should be weighted. In this case, however, we face no such difficulty because the factors overwhelmingly point in the direction of France. The assassination occurred in France. The victim, Gholam Oveissi, was an Iranian who was domiciled there. Although the Plaintiff is a U.S. citizen, he, too, was domiciled in France at the time his grandfather was murdered.”     “Hence, this is not a case in which we must choose between applying the law of the jurisdiction where the tort occurred versus that where the plaintiff was domiciled, as both are the same. Moreover, in addition to having the most significant relationship to the assassination, France has a strong governmental interest in both deterring attacks within its sovereign borders and ensuring compensation for injuries to its domiciliaries. ... The interest of California, which arises solely out of the fact that the plaintiff was born and briefly resided there for less than a year and not at the time of the attack is slight by comparison.” [Slip op. 10‑12]

Here, France was clearly the situs of the attack, and all choice‑of‑law factors point to French law. This is simply the application of the District of Columbia rules to a case filed under the former §1605(a)(7). For terrorism cases filed under the new §1605A, plaintiffs now have a federal cause of action. See Section 1605A(c)). Thus, the Court remands for an evaluation of Plaintiff’s claims under French law.

Citation: Oveissi v. Islamic Republic of Iran, 573 F.3d 835 (D.C. Cir. 2009).

WORLD TRADE ORGANIZATION

WTO Panel issues lengthy report in U.S.‑China Dispute over Chinese restrictions on imports of movies, books and other media finding many violations and inconsistencies between WTO rules and policies and actions by China

On August 12, 2009, the Dispute Settlement Body (DSB) of the World Trade Organization issued a Panel Report in the matter China ‑ Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment (DS363).

In April 2007, the U.S. asked for consultations with China about (1) certain Chinese measures that restrict trading rights as to imported movies for theater release, audio‑visual home entertainment products (videos/DVDs), sound recordings and publications (books, magazines, newspapers, electronic publications); and (2) certain Chinese measures that restrict market access for foreign suppliers. Because the consultations were unsuccessful, the DSB established a Panel in November 2007. The Report is almost 500 pages long. Here is a summary of the Panel’s findings:

China’s commitments on trading rights in its Accession Protocol

(a) Measures relating to all the products:

(I) Article X.2 of the Catalogue of Prohibited Foreign Investment Industries, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, result in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

(ii) Article X.3 of the Catalogue of Prohibited Foreign Investment Industries, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, result in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

(v) Article 4 of the Several Opinions results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

(b) Reading materials:

(ii) In respect of three requirements contained in Article 42 of the Publications Regulation, Article 42, in conjunction with Article 41, results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a) and, hence, paragraph 1.2, except for audiovisual products.

(viii) Article 41 of the Publications Regulation results in China acting inconsistently with paragraph 84(b) (discretion).

(c) Films for theatrical release:

(ii) Article 30 of the Film Regulation results in China acting inconsistently with paragraph 84(b) (discretion).

(iii) Article 30 of the Film Regulation results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

(vi) Article 16 of the Film Enterprise Rule results in China acting inconsistently with paragraph 84(b) (discretion).

(vii) Article 16 of the Film Enterprise Rule results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

(d) Audiovisual products:

(I) Article 5 of the 2001 Audiovisual Products Regulation results in China acting inconsistently with paragraph 84(b) (discretion).

(ii) Article 27 of the 2001 Audiovisual Products Regulation results in China acting inconsistently with paragraph 84(b) (discretion).

(v) Article 7 of the Audiovisual Products Importation Rule results in China acting inconsistently with paragraph 84(b) (discretion).

(vi) Article 8 of the Audiovisual Products Importation Rule results in China acting inconsistently with paragraph 84(b) (discretion).

(x) Article 21 of the Audiovisual (Sub) Distribution Rule results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).

China’s defenses: (I) China has not demonstrated that any of the relevant measures are “necessary” to protect public morals, within the meaning of Article XX(a).

China’s national treatment and market access commitments under the GATS

(a) Distribution of reading materials:

(I) Article 4 of the Imported Publications Subscription Rule and Article 42 of the Publications Regulation are together inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the wholesale of imported reading materials subject to subscription.

(ii) Article 2 of the Publications (Sub‑)Distribution Rule, in conjunction with Article 16 of the Publications Market Rule, is inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the wholesale of imported reading materials subject to sales through the market.

(iii) Where master distribution involves wholesale or retail services, Article X:2 of the Catalogue of Prohibited Foreign Investment Industries of the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, is inconsistent with China’s national treatment commitments under Article XVII of the GATS. Article 4 of the Several Opinions is also inconsistent with Article XVII.

(iv) Article 62 of the 1997 Electronic Publications Regulation is inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the master wholesale or wholesale of electronic publications.

(v) To the extent that it is applied to the wholesale of electronic publications, the Publications (Sub‑)Distribution Rule, together with the Publications Market Rule, is inconsistent with China’s national treatment commitments under Article XVII of the GATS.

(vii) The requirements concerning registered capital and operating term for foreign‑invested wholesalers, including service suppliers of other Members, respectively contained in paragraphs 4 and 5 of Article 7 of the Publications Sub‑Distribution Rule are inconsistent with China’s national treatment commitments under Article XVII of the GATS.

(b) Electronic Distribution of Sound Recordings:

(I) The Circular on Internet Culture (Article II), the Network Music Opinions (Article 8), and the Several Opinions (Article 4), each is inconsistent with China’s national treatment commitments under Article XVII of the GATS.

(c) Distribution of AVHE products:

(I) Article 8.4. of the Audiovisual (Sub‑)Distribution Rule is inconsistent with China’s market access commitments under Article XVI of the GATS as it contains a limitation on the participation of foreign capital in contractual joint ventures engaging in the distribution of AVHE products, which falls within the scope of Article XVI:2(f). For the same reasons, Article VI:3 of the Catalogue of Industries with Restricted Foreign Investment in the Catalogue, in conjunction with Article 8 of the Foreign Investment Regulation, is inconsistent with China’s market access commitments under Article XVI.

(ii) The Panel did not find that Article 1 of the Several Opinions is inconsistent with Article XVI of the GATS, as the United States has not established that this measure imposes a limitation that falls within the scope of Article XVI:2(f), as claimed by the United States.

(iii) Article 1 of the Several Opinions and the operating term requirement provided for by Article 8.5 of the Audiovisual (Sub‑)Distribution Rule each is inconsistent with China’s national treatment commitments under Article XVII of the GATS.

China’s national treatment obligations under Article III:4 of the GATT 1994

(a) Reading materials:

(i) Articles 3 and 4 of the Imported Publications Subscription Rule, as they are applied to newspapers and periodicals, are inconsistent with China’s obligations under Article III:4 of the GATT 1994.

(iii) Article 2 of the Publications (Sub‑)Distribution Rule, read in conjunction with Article 16 of the Publications Market Rule, is inconsistent with China’s obligations under Article III:4 of the GATT 1994.

Because China has acted inconsistently with the terms its Accession Protocol, the GATS, and GATT 1994, it has nullified and impaired benefits accruing to the U.S. The Panel recommends that China bring its measures into compliance with trading rules. – China is appealing the report.

Citation: China—Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment (WT/DS363/R) (12 August 2009). The report is available on the website www.wto.org. U.S. Trade Representative press release of August 12, 2009, available at www.ustr.gov.

Russian Federation agrees to enlarge ISAF supply overflights to Afghanistan that include combat material. The United States welcomes the inaugural flight of lethal material transiting Russia en route to Afghanistan to support combat operations by the International Security Assistance Force (ISAF) there. This flight results from an agreement between the United States and the Russian Federation about transit of lethal material through Russian airspace. The two nations reached this accord last July during the Presidential summit in Moscow. It complements our agreement on shipment of non‑lethal supplies to ISAF across Russian territory which has been running smoothly for several months. Together, these provide valuable alternative supply routes to our troops in Afghanistan. Russia’s agreement to allow the United States to transit lethal equipment across its territory in support of ISAF operations is an important contribution to our efforts to improve security and stability in Afghanistan. The State Department looks forward to many more flights under this agreement. Citation: Statement 2009/1010, U.S. State Department, Ian Kelly, Spokesman; Washington, D.C., Thursday, October 8, 2009, 14:35:37 – 0500.

United Nations Security Council unanimously adopts declaration against wartime sexual assaults on women and girls. Members of the Council had before them Document S/2009/489, which contains the text of a draft resolution submitted by over 60 member nations. With Secretary of State Hillary Clinton presiding, it is noted that, under the U.N. Charter, the 15 members of the Council bear a primary duty to maintain international peace and security. Satisfying that responsibility entails protecting the lives and physical security of all people, including the women and girls who comprise half the planet’s population. Even though women and children are rarely responsible for initiating armed conflict, they are often war’s most vulnerable and violated victims. The present resolution represents a step forward in the UN’s global efforts to end violence perpetrated against women and children in conflict zones. It also builds on two prior Security Council resolutions: Resolutions 1325 and 1820, adopted last year and designed to respond to, and to prevent, sexual violence used as a tactic of war to target civilians. Yet despite these actions by the Security Council, violence against women and girls in conflict‑related situations has not diminished; in fact, in some cases, it has escalated. The dehumanizing nature of sexual violence doesn’t just harm a single individual or a single family or even a single village or a single group. It shreds the fabric that weaves us together as human beings, it endangers families and communities, erodes social and political stability, and undermines economic progress. We need to understand that it holds all of us back. Also, our prior failure as an international body to respond concretely to this global problem has eroded our collective effectiveness. So the Security Council must act now to uphold the legitimacy of this body. The Council adopted the draft resolution unanimously as Resolution 1888 of 2009. Citation: Summary of Remarks on Adoption of UNSCR Resolution to Combat Sexual Violence in Conflict; Hillary Rodham Clinton, U.S. Secretary of State presiding, U.N. Headquarters, New York City, Wednesday, September 30, 2009, 12:07:55 – 0500.

United Kingdom’s new Supreme Court opens its doors to replace House of Lords’ Judicial Committee. After six years of discussions and building, the United Kingdom’s new Supreme Court is finally ready for its judicial business. The twelve‑member Supreme Court will be the final United Kingdom court of appeal for all civil cases, and all criminal cases (excluding Scotland). It will also take over the jurisdiction of the Privy Council. The court will hear its first case on Monday, October 5. Until now, as readers of the Update know, the highest court in the land was a Judicial Committee of the House of Lords known as the Law Lords. They were hidden from public view and the general populace scarcely knew they existed. From now on, the public will know where its new highest court sits – in a refurbished Middlesex Guildhall on Parliament Square; they shall be better able to see the judges at work and, in a first for any court in England and Wales, watch cases broadcast on television. It is intended that the new tribunal possess transparency, visibility and constitutional clarity. Lord Phillips of Worth Matravers, its first President, expresses it: “Transferring the function of the [highest] court from technically being a function carried out by Parliament [the House of Lords] to a function carried out by a court of judges should advance this concept.” Lord Falconer of Thoroton agrees, contending that the reform was inevitable. “We could never go on having, in a liberal democracy, where our courts become ever more important, [the highest court] operating as a committee of the second chamber of the legislature whose acts of Parliament it was not only ruling on but, from time to time, voting on. It was an unsustainable position.” There will also be changes to the highest court’s internal judicial procedure: Lord Phillips, for example, favors more sittings by larger panels (e.g. seven or nine), and more single or majority judgments rather than the prior practice of each judge giving his own separate opinion. Its judges will be known as Justices and be addressed as My Lord or My Lady. Citation: The Times [United Kingdom], page unavailable online, Thursday, October 1, 2009, 2009 WLNR 19323668.

Demjanjuk appeal of order scheduling war crimes trial rejected by German high court. Germany’s highest court, the Bundesverfassungsgericht (BVerfG) [Federal Constitutional Court] has turned down  two petitions that were filed to prevent the trial of John Demjanjuk on charges that, as a guard, he was an accessory to the mass murders at the death camp Sobibor in Nazi‑occupied Poland in 1943. The Federal Constitutional Court said that it rejected appeals from Demjanjuk’s attorney to overturn lower German court decisions to schedule his trial in Munich on next November 30 and to keep the 89‑year‑old in custody. Demjanjuk’s attorney had cited health concerns among other issues. The Court reasoned that such procedural rulings cannot be challenged through direct appeals to the Federal Constitutional Court. – The United States had the Ukrainian‑born Demjanjuk flown to Germany in May after he had lost a long battle in the U.S. federal courts to avoid deportation. Demjanjuk contends that he was merely a Red Army soldier whom the Nazis were holding as a prisoner of war and that he had never harmed anyone. Citation: Associated Press (online), Berlin, Wednesday, October 21, 2009 at 09:59:45 GMT; German Federal Constitutional Court [Bundesverfassungsgericht], Beschluesse vom 15.10.2009 und 16.10.2009, Az: 2 BvR 2331/09 und 2 BvR 2332/09.

EU Commission approves merger of Merck with Schering‑Plough Corporation. The Commission of the European Union has upheld the merger of Merck & Co. and the Schering‑Plough Corporation; the combined United States company would become the second‑largest producer of prescription medicines world‑wide. In its announcement, the EU’s antitrust authority said that the “transaction would not significantly impede effective competition” in the European pharmaceutical market. The acquisition of smaller Schering‑Plough will allow Merck to become the second‑ranking company globally in prescription medicine; this places it close behind Pfizer Inc. It is projected that the new company would have a total of about $42.4 billion in annual sales. Citation: Associated Press (online), Brussels, Belgium, Friday, October 23, 2009 at 08:52:43 GMT.