2009 International Law Update, Volume 15, Number 8 (August)

2009 International Law Update, Volume 15, Number 8 (August)

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

ACT OF STATE DOCTRINE

Where Provincial Government of Marinduque, Philippines, alleges environmental torts against mining company, Ninth Circuit remands lawsuit to state court because federal‑question removal requires that rights or immunities created by U.S. Constitution or laws must form essential element of Plaintiff’s cause of action in its well‑pleaded complaint

The Provincial Government of the island of Marinduque, Philippines (Plaintiff) sued Placer Dome Corporation (Defendant) in Nevada state court for damages caused by the Defendant’s 30 years of mining operations on Marinduque, a Philippine island 355 square miles in area, south of the main island of Luzon. The complaint alleges that Defendant has long been polluting the lands and waters of Marinduque, caused two environmental disasters including the collapse of a dam, was poisoning the islanders, and then left its sites without making any efforts to clean up their environment.

The Defendant removed the case to a Nevada federal court based on federal‑question jurisdiction. The Plaintiff moved the court to make the Defendant show cause why the court should not remand the action to state court for lack of subject‑matter jurisdiction. The district court held that there was federal‑question jurisdiction under the Act of State Doctrine and denied the Plaintiff’s Motion.

Under the Act of State Doctrine, the U.S. courts presume that the acts of foreign sovereigns taken within their own jurisdiction were valid. Defendant then moved to dismiss the lawsuit for lack of personal jurisdiction and forum non conveniens. Eventually, the district court did base its jurisdiction upon the Act of State Doctrine, and dismissed the lawsuit based under the doctrine of forum non conveniens.

The Plaintiff duly noted this appeal. The U.S. Court of Appeals for the Ninth Circuit reverses. It finds that none of the alleged governmental misconduct was essential to any of the Plaintiff’s causes of action. Thus, the district court lacked subject‑matter jurisdiction.

The Court points out that the Plaintiff’s lengthy complaint includes many acts alleging government wrongdoing and corruption. For example, the Plaintiff claimed that then Philippine President Ferdinand Marcos owned 49% of one of Defendant’s subsidiaries, that his government authorized or allowed mining in a provincial forest reserve, and that it did nothing to prevent the dumping of toxic waste in a nearby bay. Defendant claims that the Act of State Doctrine bars this lawsuit because it is based on damaging acts done under governmental permits plus other acts or omissions of the Philippine Government.

“Fatal to the district court’s removal jurisdiction, however, is that the act of state doctrine is implicated here only defensively and the complaint does not ‘necessarily raise a stated federal issue, actually disputed and substantial.’ Grable & Sons Metal Prod., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). [That is]: ‘the presence or absence of federal‑question jurisdiction is governed by the well‑pleaded complaint rule, which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff’s properly pleaded complaint.’ ... ‘A defense is not part of a plaintiff’s properly pleaded statement of his or her claim.’ ...”

“Here, none of the supposed acts of state identified by the district court is essential to the [Plaintiff’s] claims. Nor do the other allegations in the complaint invoke an act of state as an essential element of any claim. Nor does the complaint ‘necessarily raise a stated federal issue, actually disputed and substantial.’ Id. To be sure, the complaint is sprinkled with references to the Philippine government, Philippine law, and the government’s complicity in the claimed damage to the Marinduquenos.”

“But the exercise of federal‑question removal jurisdiction requires more—it requires the assertion of a federal question on the face of the [Plaintiff’s] properly pleaded complaint or a disputed, substantial federal issue that does not disturb any congressionally‑approved balances of state or federal judicial responsibilities.”

“Just as raising the specter of political issues cannot sustain dismissal under the political question doctrine, neither does a general invocation of international law or foreign relations mean that an act of state is an essential element of a claim. Cf. [W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 409 (1990)] (holding that federal courts ordinarily have the obligation to exercise their jurisdiction and ‘[t]he act of state doctrine does not establish an exception for cases and controversies that may embarrass foreign governments’) ...”“... For example, proving that [Defendant] was reckless when it hastily built the Maguila‑Guila dam—which allegedly collapsed only two years after being built—does not implicate, let alone require, any act of state. Rather, invocation of the act of state doctrine here would be via [Defendant’s] defense to the [Plaintiff’s] claims and as such cannot support removal jurisdiction.” [Slip op. 12‑14]

Citation: Provincial Gov’t of Marinduque v. Placer Dome Inc., 582 F.3d 1083 (9th Cir. 2009).

CRIMINAL LAW

Fourth Circuit affirms criminal conviction of U.S. civilian CIA contractor for causing death of Afghan detainee at U.S. base in Afghanistan by repeated kicks and beatings, based on recent statutory extensions of special maritime and territorial jurisdiction federal courts

David Passaro (Defendant) was a civilian Central Intelligence Agency (CIA) contractor in Afghanistan when he allegedly assaulted and killed Abdul Wali in 2003 at Asadabad Firebase, Afghanistan. U.S. and coalition forces had captured the Asadabad Firebase in late 2001 by. Defendant, a former special forces medic, arrived in 2003, when the base was the target of rocket attacks. U.S. forces suspected that Afghan national Abdul Wali had organized those rocket attacks.

Wali surrendered voluntarily and Defendant proceeded to interrogate him for two days. Defendant’s “techniques” of persuasion included throwing Wali to the ground; striking him; hitting him with a large flashlight; and kicking him in the groin. At the end of the second day of mistreatment, Wali collapsed and died.

A North Carolina federal jury found Defendant guilty of the fatal assaults. Defendant argues on appeal, inter alia, that the U.S. courts lacked criminal jurisdiction over alleged assaults at U.S. Army outposts in Afghanistan. The U.S. Court of Appeals for the Fourth Circuit, however, affirms.

In this case, the Government based criminal jurisdiction on the special maritime and territorial jurisdiction statute 18 U.S.C. § 7 (2006). It extends federal criminal jurisdiction over certain crimes that states have been traditionally regulating. Territorially, it extends to federal enclaves such as military bases, federal buildings, national parks, the high seas within U.S. admiralty and maritime jurisdiction, as well as to offenses committed on aircraft and spacecraft.

In 2001, Congress added another subsection to § 7 through the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. No. 107‑56, § 804, codified at 18 U.S.C. § 7(9) (2006). It extends special maritime and territorial jurisdiction to “the premises of United States diplomatic, consular, military or other United States Government missions or entities in foreign States, including the buildings, parts of buildings, and land appurtenant or ancillary thereto or used for purposes of those missions or entities, irrespective of ownership ...”

The question here is whether this Section enlarges a federal court’s jurisdiction to crimes allegedly committed at the Asadabad Firebase in 2003. In order to determine the Section’s meaning and congressional intent, the district court focused on the statutory terms “premises” and “mission.” The district court then found jurisdiction over the alleged crime committed in Asadabad in 2003. It reasoned that the U.S. has been conducting a military mission in Afghanistan since late 2001, and the activities at the Asadabad Firebase form part of that larger longstanding mission.

The Court of Appeals, however, considers this construction inadequate. Instead, it construes § 7(9) to apply only to fixed locations by stressing the importance of the terms “mission” and “premises.” The fact that Congress placed subsection 9 within § 7 which only refers to more or less fixed locations supports this interpretation. Congress included “military mission” in a particular list of missions such as diplomatic, consular, and military missions, thus indicating that it refers to permanent locations.

The Court then explains. “We turn then to the question of whether, by June 2003, the ‘premises’ of Asadabad constituted a United States ‘military mission’ so as to render it within the criminal jurisdiction of a federal district court.”

“Clearly, long‑established and permanent U.S. military bases abroad, e.g., [the] Naval Air Facility Atsugi in Japan and [the] Ramstein Air Base in Germany, constitute ‘premises’ of a ‘military mission’ under § 7(9). These bases are the straightforward ‘military’ analogue to embassies, [as well as to] the ‘diplomatic’ and ‘consular’ missions plainly within § 7(9)’s scope.”

“On the other hand, we doubt that § 7(9) reaches so broadly as to encompass any area that U.S. soldiers occupy, no matter how temporary or mobile their presence. For example, we agree with [Defendant] that § 7(9) would not reach any piece of Afghan soil on which a soldier ‘pitches his pup tent.’ ...”

“In cases that fall between these two extremes, courts must consider a number of common‑sense, objective factors to determine whether a particular location qualifies as the ‘premises’ of a United States ‘military mission’ for purposes of § 7(9). Relevant factors include [1] the size of a given military mission’s premises, [2] the length of United States control over those premises, [3] the substantiality of its improvements, [4] actual use of the premises, [5] the occupation of the premises by a significant number of United States personnel, and [6] the host nation’s consent (whether formal or informal) to the presence of the United States. This list surely does not exhaust every factor relevant to determining § 7(9)’s reach; nor is any [single] factor a prerequisite for jurisdiction. But these factors do bring to bear relevant, objective considerations in resolving this question.” [Slip Op. 9‑10]

The Court then applies these elements to the case at bar. Asadabad in fact does possess all the qualities of a substantially permanent U.S. base abroad, and thus falls within the ambit of § 7(9). First, as to size, Asadabad is a substantial facility, covering about 25 acres with a 10‑foot mud wall around it. Second, by the time Defendant arrived, U.S. forces had controlled Asadabad for 18 months, thus suggesting a likelihood of permanent control. Third, as to permanence and substance, U.S. forces improved and fortified Asadabad by adding buildings, power generators, and plumbing. Fourth, as further proof of permanence, the U.S. used Asadabad to conduct military operations just as they would other facilities in Afghanistan and around the world.

Citation: United States v. Passaro, 577 F.3d 207 (4th Cir. 2009).

HUMAN RIGHTS (EUROPEAN CONVENTION ON)

Where Wall Street Journal Europe applied to European Court of Human Rights that, in libel suit against it in English courts by prominent Saudi Arabians, application of presumption of falsity in public interest matter did not violate European Human Rights Convention

On February 6, 2002 the Wall Street Journal Europe (WSJE), a daily newspaper, published on its front page an important article. It reported that the Saudi Arabian Monetary Authority (SAMA) was in fact monitoring bank accounts associated with some prominent Saudi businessmen to prevent the funneling of funds to terrorist organizations. It also stated that United States law enforcement agencies had asked for the monitoring.

WSJE, the first Applicant (A1) in the European Court of Human Rights (ECHR), is a corporation registered under Belgian law. It reports on developments in international business, politics and diplomacy. The second Applicant, Frederick Kempe (A2), is a U.S. national was the editor and associate publisher of the newspaper. The third Applicant, James Dorsey (A3), is a German national and one of the rare western journalists who speaks Arabic. The fourth Applicant, journalist Glenn Simpson (A4), is a U.S. national. The fifth Applicant, Raju Narisetti (A5), is a U.S. national who serves as the Managing Director of the newspaper and lives in Belgium. A2 through A5 live in Europe.

The article attributed the information to both U.S. and Saudi officials. The piece named a number of companies and individuals including the Jameel Group of Companies. The Applicants submitted that the story had emerged through investigative journalism in Saudi Arabia, where access to information was particularly difficult for European newspapers. A3 had promised his local sources anonymity on the assumption that the Saudi Government would carry out brutal reprisals were they identified. Senior staff in Washington approved the story and had asked their sources in the U.S. Treasury Department to confirm it.

Mr. Jameel, who was head of a group of companies and of one of the corporate entities forming part of the Jameel Group, and his company (Claimants) sued the WSJE for libel in the English courts. The WSJE denied that the article was defamatory. Given the importance of maintaining the confidentiality of its sources and the fact that evidence in support of the publication was inaccessible in Saudi Arabia, the WSJE did not rely on the defense of justification in the proceedings.

On October 7, 2003, the trial judge concluded that the words were not capable of bearing a lesser defamatory meaning than that of “reasonable grounds to suspect” the claimants of having terrorist ties and of funneling funds to terrorist organizations. Moreover, he held that the claimants could offer evidence to prove that the article’s central allegation was wrong. In an interlocutory appeal, the English Court of Appeal (Civil Division) agreed that the article was capable of having lesser defamatory meanings or a non‑defamatory meaning.

The parties then tried the action before an English jury between December 1 and 19, 2003. Counsel for each of the parties invited the judge to ask the jury what meaning the words in the article bore. The judge declined to do so. In his direction to the jury, he stated:

“First, if you decide that it is defamatory of one or both claimants, we must all proceed on the basis that any such defamatory allegation is untrue. ... The defendants would be entitled to prove the truth of the allegation they have made ... They have chosen not to do that in this case and, therefore, the claimants are entitled to the presumption of innocence. It is not for them to prove anything ... If it does reflect in any way in a defamatory sense upon either of them, and ... the article does in some way link one or other or both of them to the funding of terrorism, then we accept, as an absolute fundamental assumption in this case, that such allegation is untrue.”

The jury found that the article was defamatory and that, subject to the judge’s legal decision on qualified privilege, the proper damages were £30,000 to Mr. Jameel and £10,000 to his company. They found that the WSJE had proved that the author had obtained the information he claimed from a Saudi businessman, but had not shown that he had gotten confirmation from his other four sources. The jury further found that A3 had phoned the office of the Jameel Group on February 5, 2002. A representative of the Jameel Group asked the WSJE to delay publication for 24 hours so that he could get in touch with Mr. Jameel, who was in Japan on business; A3 had turned down the request.

On December 19, 2003 the trial judge rejected the Applicants’ plea of qualified privilege. On January 20, 2004. He declared that: “There is a presumption that defamatory words are false, unless and until the relevant defendant proves them to be true. Here, because there is no plea of justification, the presumption will prevail.”

As to the meaning of the impugned words, the judge had regard [1] to the ruling in the interlocutory proceedings as to the possible range of meanings, [2] to the jury’s finding that the words were defamatory and [3] to the sums which the jury had specified as appropriate damages. He concluded that the words were defamatory in some sense and that at worst they suggested that there were “reasonable grounds to suspect” claimants’ involvement in the funneling of money to terrorists.

The judge next made three key findings. The first was that the author could not have written the article in reliance on the claims of the Saudi businessman alone. Secondly, there was no urgency that required the WJSE to rush to publication before giving the representative a reasonable chance to inform Mr. Jameel in Japan. Finally, it would have been enough to leave out the claimants’ names since it would be contrary to the public interest to publish the names of those being monitored.

The Court of Appeal upheld the trial judge’s decision in February 2005 but on a more limited ground. While a defendant, who wished to rely on the defense of qualified privilege under Reynolds v. Times Newspapers Ltd. ([2001] 2 A.C. 127), might have to prove that it was reasonable for him to believe that a defamatory article was true, the Applicants had implicitly accepted that, if the article turned out to have a defamatory meaning, they did not believe that it was true.

On May 4, 2005 the Court of Appeal granted leave to appeal to the House of Lords to resolve the scope of the Reynolds defense of qualified privilege and the presumption of damage which allowed recovery of damages by the plaintiff corporation without proof of specific losses. It declined, however, leave to appeal on the jury reasons issue. The House of Lords unanimously allowed the appeal on the scope of the Reynolds privilege on October 11, 2006 and dismissed the Claimant’s action . ... The principal issue for determination by the House of Lords was whether the WSJE had been entitled to rely on the [Reynolds] defense of publication in the public interest. One member of the Judicial Committee noted that qualified privilege protects a publisher if he has taken such steps as a responsible journalist would take to try and ensure that what was published was accurate and fit for publication. He found that the Court of Appeal’s ruling “subverts the liberalizing intention of the Reynolds decision”.

“The subject matter of the article was of great public interest, written by an experienced specialist reporter and approved by senior staff who themselves sought to verify its contents. The article was unsensational in tone and factual in content. The claimants’ response was sought and the paper’s inability to obtain a comment recorded. It was very unlikely that a comment would have been revealing. Overall, he concluded that “it might be thought that this was the sort of neutral, investigative journalism which Reynolds privilege exists to protect”.

Another Member also considered that the trial judge and the Court of Appeal had given the Reynolds defense “too narrow a scope”. He observed that it was the material which was privileged and not the occasion on which it was published while the burden was upon the defendant to prove that the conditions under which the material was privileged were satisfied. The trial judge had misdirected the jury when he requested them to find whether the author’s sources had indeed confirmed the reported facts bearing in mind that the reported facts had been known to be untrue.

Applying the criteria set out in Reynolds, he concluded that the article “was a serious contribution in measured tone to a subject of very considerable importance”, the inclusion of the defamatory statements—the names of large and respectable Saudi businesses—was an important part of the story showing that the U.S. Treasury’s request extended to the heartland of the Saudi business world, and the Applicants had behaved “fairly and responsibly in gathering and publishing the information” in compliance with the “responsible journalism” test.

As to the Applicants’ refusal to delay publication, this Member noted that the delay would not have made a difference to the article: in the circumstances, Mr Jameel would have been asked whether he knew of any reason why anyone would want to monitor his account and the answer would most likely have been in the negative. Failure to wait was not enough to deprive the newspaper of the defense that they were reporting on a matter of public interest. Hence, there was no basis for rejecting the newspaper’s Reynolds defense. Baroness Hale concluded that “if the public interest defense does not succeed on the known facts of this case, it is hard to see it ever succeeding”.[292]

In filing in the ECHR, Fourth Section, the Applicants contended that the common law presumption of falsity infringed Articles 6 and 10 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. 3, 1953] (the Convention). The court, however, noted that it was too late for the Applicants to raise this point; ... With regard to the application of the presumption of falsity in the judge’s direction to the jury, the court explained as follows:

“[W]e do not consider that it was appropriate for the jury to apply the presumption of falsity when considering the issues of fact that were relevant to the Reynolds privilege.(see Reynolds v. Times Newspapers Ltd. ( [2001] 2 A.C. 127)). When considering whether Reynolds privilege attaches to the publication of a potentially defamatory article it is necessary to decide whether the Applicants acted as ‘responsible journalists’ in publishing the article. ... [290]

What has to be considered is whether it was responsible to publish the article having regard to the risk that the defamatory imputation in the article might prove to be untrue ... It does not seem to us right that the jury should apply a presumption that the article was false.”

The ECHR first dealt with the alleged non compliance with the provisions of the Convention. 1 “The Applicants complained under Article 6 of the Convention that the refusal of the trial judge to request the jury to determine the defamatory meaning of the article had deprived them of their right to have an adequately reasoned judicial decision.”

2 “They further complained under Article 6 that the trial was unfair because the application of the presumption of falsity meant that they had had to show that their article was published in good faith and in the public interest when the information it contained had been deemed to be false and where all the evidence for verifying the defamatory allegations had been unobtainable.”

3 “Lastly, they complained under Article 10 that the operation of the common law presumption of falsity had undermined their plea of defense of qualified privilege and was incompatible with their right to freedom of expression as it had had a ‘chilling effect’ that deterred voicing criticism because of doubt whether it could be proved in court.”

“The Applicants complained that the common law presumption of falsity had undermined their plea of defense under Reynolds and had had a disproportionate ‘chilling effect’ on their exercise of their right to free speech contrary to Article 10 of the Convention.”

“Article 10 provides, in so far as relevant: ‘1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority ...’”

“‘The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society ... for the protection of the reputation or rights of others ...’”“Article 10 of the Convention does not guarantee a wholly unrestricted freedom of expression even with respect to press coverage of matters of serious public concern. By reason of the ‘duties and responsibilities’ inherent in the exercise of the freedom of expression, the safeguard afforded by Article 10 to journalists in relation to reporting on issues of general interest is subject to the proviso that they are acting in good faith in order to provide accurate and reliable information in accordance with the ethics of journalism or, in the words of the House of Lords, ‘the standards of responsible journalism’ (see Bladet Tromso v. Norway (2000) 29 E.H.R.R. 125 [65]).” [292]

“In accordance with its case law, in order to assess the legitimacy of an impugned statement, a distinction needs to be made between statements of fact and value judgments. In assessing the legitimacy of statements of fact the Court considers that it is not, in principle, incompatible with Article 10 to place on a defendant in libel proceedings who wishes to rely on the defense of justification, the onus of proving—to the civil standard—the truth of defamatory statements (see, inter alia, Application No.17550/03, Alithia Publishing Company Ltd v. Cyprus, May 22, 2008 , [68]; McVicar v. United Kingdom (2002) 35 E.H.R.R. 22, [87]; and Steel v. United Kingdom (2005) 41 E.H.R.R. 22, [93]).“In previous cases, when the Court has been called upon to decide whether to exempt newspapers from their ordinary obligation to verify factual statements that are defamatory of private individuals, it has taken into account various factors, particularly [1] the nature and degree of the defamation and the extent to which the newspaper could have reasonably regarded its sources as reliable with regard to the allegations (Bladet Tromso, (2000) 29 E.H.R.R. 125, [66]).”

“These factors, in turn, require consideration of other elements such as [2] the authority of the source ( Bladet Tromso, (2000) 29 E.H.R.R. 125), [3] whether the newspaper had conducted a reasonable amount of research before publication ( Prager and Oberschlick v. Austria (1996) 21 E.H.R.R. 1, [37]), [4]whether the newspaper presented the story in a reasonably balanced manner (Bergens Tidende v. Norway (2001) 31 E.H.R.R. 16, [57]) and [5] whether the newspaper gave the persons defamed the opportunity to defend themselves ( Bergens Tidende, (2001) 31 E.H.R.R. 16, [58]).”

“Hence, the nature of such an exemption from the ordinary requirement of verification of defamatory statements of fact is such that, in order to apply it in a manner consistent with the case law of this Court, the domestic courts have to take into account the particular circumstances of the case under consideration.”

“Turning to the circumstances of the present case, the Court observes that the plea of qualified privilege based on Reynolds v. The Times Newspapers Ltd. [2001] 2 A. C. 127 is an exceptional defense intended to ensure free communication without fear of litigation, even if that involves making defamatory statements of fact which cannot be proved to be true. It exempts newspapers from their ordinary obligation to verify factual statements that are defamatory so long as they have, taking into account all the relevant circumstances, acted in accordance with the standards of ‘responsible journalism’ (see Application Nos 23676/03 and 3002/03, Times Newspapers Ltd. v. United Kingdom, October 11, 2005).”

“With regard to the Applicants’ contention that the presumption of falsity is incompatible with Article 10 of the Convention, the Court notes that it has previously accepted this presumption as consistent with Article 10 in the context of the defense of justification (see Application No.17550/03, Alithia Publishing Company Ltd. v. Cyprus, May 22, 2008, [68] and McVicar, (2002) 35 E.H.R.R. 22, [87]).” [293].

“Without underestimating the presumption of falsity’s potential to have a ‘chilling effect’ on the press, its use in this context aims to protect a claimant’s right to protection of his reputation as guaranteed by Article 8 of the Convention ( Pfeifer v. Austria (2009) 48 E.H.R.R. 8, [35], [38]). However, different considerations must apply where the defamatory factual statements are derived from a source that could reasonably be relied on and where, consistently with the Court’s case law, a newspaper is dispensed from its ordinary obligation to verify the statements (see, inter alia, Bladet Tromso, (2000) 29 E.H.R.R. 125). In such a case, it would not be consistent with Article 10 to require that the newspaper establish the truth of the statements at trial.”

“The Applicants argued that the presumption of falsity was allowed to undermine their plea of defense as it rendered it extremely difficult to show that they had acted reasonably when the information they published was deemed false as opposed to information that could not be proved to be true. The Court notes however that the inappropriate application of the presumption of falsity by the trial judge was criticised by the Court of Appeal and was ultimately rectified by the House of Lords.”

“In particular, the members of the House of Lords expressly noted that the inability to verify the defamatory statements of fact at the trial was not relevant for the purposes of the particular defense. Hence, despite the Applicants’ difficulties in proving the impugned statements, they could nevertheless justify their publication because they had acted in good faith and in accordance with the standards of responsible journalism. On this basis, their appeal to the House of Lords was successful and the action against the Applicants was dismissed.”

“In these circumstances, [this] Court considers that the Applicants cannot claim to be victims of a violation of their rights under Article 10 of the Convention in this respect. This complaint must, therefore, be rejected in accordance with Articles 35(3) and (4) of the Convention.” [294].

Citation: The Wall Street Journal Europe SPRL v. United Kingdom, 2009 WL 2848114(ECHR); (2009) 48 E.H.R.R. SE 19 (2009).

JURISDICTION (PERSONAL)

In Alien Tort Claims Act (ATCA) action by alleged victims of Argentine military dictatorship filed against German company Mercedes Benz, with U.S. jurisdiction based on adequacy of Mercedes’ U.S. subsidiary’s U.S. contacts, Ninth Circuit agrees with District Court that it had no personal jurisdiction over German parent company in absence of showing of pervasive and continual control over subsidiary

The Plaintiffs are Argentine residents who sued Daimler‑Chrysler AG (DCAG) for human rights violations allegedly committed by DCAG’s subsidiary, Mercedes Benz Argentina (MBA), during the military rule. According to the complaint filed in California district court in 2004, Argentine security forces kidnaped, detained and tortured the Plaintiffs or their family members at the direction of their former employer MBA. MBA managers allegedly had a working relationship with military officers and reported “subversive” employees.

Here, the Plaintiffs tried to ground personal jurisdiction over DCAG in the U.S. through the U.S. subsidiary, Mercedes Benz USA, LLC (MBUSA). DCAG is a German corporation headquartered in Stuttgart, Germany. MBUSA is a Delaware limited liability company with its principal place of business in New Jersey, with an office in California. DaimlerChrysler North America Holding Corporation owns it; it in turn is a subsidiary of DCAG.

A General Distributor Agreement governs the DCAG‑MBUSA relationship. DCAG has no control of the products’ ultimate destinations within the U.S. While MBUSA must comply with certain DCAG‑dictated standards such as for advertising and relations with resellers, it does not directly manage MBUSA.

Upon DCAG’s motion, the district court dismissed the case under Rule 12(b)(2) for lack of personal jurisdiction over it. This appeal followed. The U.S. Court of Appeals for the Ninth Circuit affirms.

The parties dispute whether there is subject matter jurisdiction over the claims pursuant to the Alien Tort Claims Act (ATCA) and the Torture Victims Protection Act (TVPA). 28 U.S.C. § 1350. The district court addressed the issue of personal jurisdiction first. Here, the Plaintiffs argue that district court should have attributed the continuous and systematic contacts of MBUSA to its parent company DCAG.“

In Doe v. Unocal Corp., 248 F.3d 915, 926 (9th Cir. 2001)], we described our agency doctrine, by which the contacts of a subsidiary may be imputed to the parent. Id at 928‑31. ‘To satisfy the agency test, the plaintiff must make a prima facie showing that the subsidiary represents the parent corporation by performing services `sufficiently important to the [parent] corporation that if it did not have a representative to perform them, the [parent] . . . would undertake to perform substantially similar services. ...”

“The Unocal ‘court distinguished an agency relationship between a parent and its subsidiary from that of a holding company and its subsidiary, explaining that in the case of a holding company the parent could simply hold another type of subsidiary.’ supra at 929 ... If ‘the business of the parent is the business of investment,’ then the subsidiaries do not conduct business as agents. Id. ‘Where, on the other hand, the subsidiaries are created by the parent, for tax or corporate finance purposes, there is no basis for distinguishing between the business of the parent and the business of the subsidiaries.’ ‘ Id. ‘The doctrine supports the exercise of jurisdiction when the local subsidiary performs a function that is compatible with, and assists the parent in the pursuit of, the parent’s own business.’ ...”

“To that end, ‘[a]ppropriate parental involvement includes: monitoring of the subsidiary’s performance, supervision of the subsidiary’s finance and capital budget decisions, and articulation of general policies and procedures.’ Unocal, supra at 926 ... ‘[I]t is entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary, and that fact alone may not serve to expose the parent corporation to liability.’ Id. Similarly, consolidated reports are not dispositive. Id. at 929.” [Slip op. 9‑10]

The Court then makes clear that its agency law requires a two‑step analysis. First, the parent company must exert control in a way that the law may reasonably treat the subsidiary as the parent’s agent or instrumentality. This control must be greater than what is commonly expected as an incident to ownership. Second, the agent‑subsidiary’s tasks must be important enough to the parent that if the parent did not have such an agent‑subsidiary, it would perform substantially similar tasks.

“Under common law principles, control is the sine qua non of agency. See Restatement (Third) of Agency Section 1.01 cmt. c (2006) (‘A relationship is not one of agency within the common‑law definition unless ... the principal has the right ... to control the agent’s acts.’).”

“The requirements that MBUSA provide detailed information and comply with general marketing standards are consistent with the ‘monitoring’ and ‘articulation of general policies’ permitted under our law. See Unocal, supra at 926. Furthermore, although DCAG articulates some specific policies for MBUSA, the Agreement was terminable, MBUSA goals are negotiated by both parties, and title to the cars passes in Germany.” [Slip Op. 12]

“The requirements that MBUSA provide detailed information and comply with general marketing standards are consistent with the ‘monitoring’ and ‘articulation of general policies’ permitted under our law. See Unocal, supra at 926. Furthermore, although DCAG articulates some specific policies for MBUSA, the Agreement was terminable, MBUSA goals are negotiated by both parties. ... DCAG has no control over the product’s ultimate destination within the United States, and the evidence shows that MBUSA had the power to independently decide against buying DCAG [certain] vehicles in California. This is not pervasive and continual control.” [Slip Op. 12]

Citation: Bauman v. Daimler Chrysler Corp., 579 F.3d 1088 (9th Cir. 2009).

SOVEREIGN IMMUNITY

In case of art appropriation by agent of Nazi government in 1939, Ninth Circuit finds in matter of first impression that FSIA expropriation exception applies even where foreign sovereign defendant is not entity alleged to have expropriated property at issue

Claude Cassirer (Plaintiff) claims that, in 1939, an agent of the Nazi regime unlawfully seized a painting by French impressionist painter Camille Pissaro [1830‑93] from his grandmother Lilly Cassirer. It is entitled “Rue Saint‑Honore, Apres‑midi, Effet de Pluie.” Mme Cassirer’s great‑grandfather, Julius, a German citizen, had bought the painting in 1898.

Eventually, Cassirer’s grandmother inherited the painting. As the persecution of Jews in Germany increased, Lilly sought permission to leave Germany with her possessions. A government appraiser forced her to sell the painting for about $360. She agreed only because she was afraid that, otherwise, they would not let her leave the country. Decades later, Baron Hans‑Heinrich Thyssen‑Bornemisza, a private art collector, bought the work.

The Museum of the Thyssen‑Bornemisza Collection Foundation (Foundation) in Madrid, Spain is now displaying the Pissaro painting. At some point, the Kingdom of Spain (Spain) agreed to acquire the painting as well as the rest of the Foundation’s collection. Cassirer first unsuccessfully petitioned the Spanish Minister for Education, Culture and Sports, the Chair of the Foundation’s Board, to return the painting. Cassirer did not file any further claims in Spain.

Instead Plaintiff brought suit in a California federal court, naming the Foundation and Spain as Defendants. The district court denied the Defendants’ challenges to personal jurisdiction, standing, and the existence of a justiciable case or controversy, and this interlocutory appeal ensued. The U.S. Court of Appeals for the Ninth Circuit dismisses the appeal as to these rulings.

As to the collateral order doctrine, however, the Court does find jurisdiction to review the sovereign immunity question. In a matter of first impression, the Court considers whether the expropriation exception of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(3) applies when the foreign state defendant is not the entity that originally expropriated the property in violation of international law. In a two to one vote, the Court concludes that it does.

Plaintiff argued that neither the Foundation nor Spain are immune because of the “expropriations exception” of § 1605(a)(3); it provides that a “foreign state shall not be immune ... in any case .... in which rights in property taken in violation of international law are in issue ...” Its language does not literally limit the class of Defendants to the very sovereign entity that seized the property in violation of international law. In this case, both sides agree that it was Germany that originally expropriated the painting. The Defendants urged the Court to avoid reading such a requirement into § 1605(a)(3). The Court agrees with the Plaintiff.

“We find § 1605(a)(3) to be unambiguous. Where ‘the intent of Congress is clear and unambiguously expressed by the statutory language,’ that is normally the end of the statutory analysis. Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 550 U.S. 81, 93 (2007). We hold that the plain language of § 1605(a)(3) does not require that the foreign state (against whom the claim is made) be the entity who expropriated the property in violation of international law.”

“Our holding is consistent with the legislative history ... In reviewing Congress’s intent in enacting the FSIA, we consider§ 1602, which sets forth Congress’s findings and purpose. This section expresses Congress’s understanding that foreign states are not immune from suit ‘insofar as their commercial activities are concerned.’... In explaining § 1602, the House Report states that Congress is adopting the restrictive theory of sovereign immunity, that is, ‘[T]he sovereign immunity of foreign states should be ‘restricted’ to cases involving acts of a foreign state which are sovereign or governmental in nature, as opposed to acts which are either commercial in nature or those which private persons normally perform.’ H.R. Rep. No. 94‑1487 at 14 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6613.” [Slip op. 12‑13]

“Because nothing in the plain language of the FSIA or the legislative history requires us to read additional language into the statute, we hold that the expropriation exception to sovereign immunity found in § 1605(a)(3) does not require that the foreign state against whom the [federal] claim is made be the [same] foreign state that took property in violation of international law.” [Slip op. 15]

The Court then turns to the “commercial activity” exception of the FSIA. It removes immunity where “property or any property exchanged for such property is owned or operated by an agency or instrumentality of the of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.” 28 U.S.C. § 1605(a)(2). The district court had reviewed the Foundation’s activities in the U.S., which included buying books and other materials from U.S. sources; selling posters and books to U.S. purchasers; and contracting with U.S. museums for the lending of art works. The district court concluded that the Foundation had in fact engaged in such commercial activity.

The Appellate Court agrees. It remands the matter to the district court to consider, in light of Sarei, whether the circumstances of this case require an exhaustion of other available local remedies.

The Court then turns to the question of whether Plaintiff should have exhausted his remedies elsewhere. Spain claims that Section 1605(a)(3) does not apply because Plaintiff failed to pursue legal remedies in either Spain or Germany. Whether § 1605(a)(3) requires such exhaustion is also a matter of first impression. The FSIA’s language and its legislative history give no indication whether it demands preliminary exhaustion of local remedies.

“Neither Congress nor this court have imposed an absolute exhaustion of remedies requirement in cases brought against foreign states under an exception to the FSIA. Yet, where principles of international comity and rules of customary international law require exhaustion, we exercise sound judicial discretion and consider exhaustion on a prudential, case‑by‑case basis. See Sarei v. Rio Tinto, PLC, 550 F.3d 822, 828 (9th Cir. 2008) (en banc) (plurality opinion) [see 2008 International Law Update 190].”

“In Sarei, we held that domestic prudential standards and core principles of international law require a district court to consider exhaustion in appropriate cases. Id. at 824 ... Under our prudential approach, when a defendant affirmatively pleads failure to exhaust remedies, the district court must, as a discretionary matter, determine in the first instance whether to impose such a requirement on a plaintiff. Id. at 832.”

“Although Sarei addressed exhaustion in the context of the [ACTA], where Congress has not clearly adopted or rejected exhaustion as a jurisdictional prerequisite, our formulation of prudential exhaustion applies equally to cases brought against foreign states (and their instrumentalities) under the FSIA ... In this case, Appellants have asserted that Plaintiff failed to exhaust available remedies in Spain or Germany. Although the district court correctly concluded that the FSIA does not [explicitly] require exhaustion of remedies, the court erred by failing to conduct a prudential exhaustion analysis.”

“On remand, the district court should be guided by the principles we outlined in Sarei. Summarizing the Sarei framework generally, we first note that the district court need only consider exhaustion to the extent the defendant has affirmatively pleaded Plaintiff’s failure to exhaust local remedies. See Sarei, supra at 832 (‘The defendant bears the burden to plead and justify an exhaustion requirement, including the availability of local remedies.’) ...”

“Second, the court must consider whether Congress has clearly required exhaustion for the specific claims asserted in the complaint. If, as in this case, Congress has not imposed or rejected such a requirement, the court must then determine whether the applicable substantive law would require exhaustion. ...”

“Third, the court must consider whether the defendant has met its burden to show the availability of local remedies and that such remedies have not been exhausted. Id. The plaintiff may rebut a showing of unexhausted remedies abroad by demonstrating the futility of exhaustion (‘by showing that the local remedies were ineffective, unobtainable, unduly prolonged, inadequate, or obviously futile.’). Id. ...”

 “Finally, the court may, in its sound discretion, impose or waive exhaustion after assessing the availability, effectiveness, and possible futility of any unexhausted remedies in light of various prudential factors, including but not limited to: (1) the need to safeguard and respect the principles of international comity and sovereignty, (2) the existence or lack of a significant United States ‘nexus,’ ... (3) the nature of the allegations and the gravity of the potential violations of international law, and (4) whether the allegations implicate matters of ‘universal concern’ for which a state has jurisdiction to adjudicate the claims without regard to territoriality or the nationality of the parties. See id. at 830‑31.” [Slip op. 22‑26]

Citation: Cassirer v. Kingdom of Spain, 580 F.3d 1048 (9th Cir. 2009).

Russian Constitutional Court extends moratorium on death penalty. The Russian Constitutional Court has ruled that a moratorium on capital punishment should remain in force until the nation expressly outlaws the death penalty. The original moratorium came about in 1999 but its legal basis will expire in January 2010. The Chief Judge says that Russia must extend the moratorium on executions until it ratifies the amendment to the European convention that bans the death penalty. When it joined the Council of Europe in 1996, an organization of over forty nations in the European sphere (not to be confused with the European Union) Russia proclaimed a moratorium on capital punishment and pledged to abolish it, but has not yet done so. The Russian Federation is a party to the European Convention for the Protection of Human Rights and Fundamental Freedoms, [312 U.N.T.S. 221; E.T.S. 5, as amended]. On the other hand, it has not yet ratified Protocol 6 [E.T.S. 114] to the Convention which contains an unqualified ban on the death penalty. Citation: Russian Constitutional Court, St. Petersburg, Russia, Thursday, November 19, 2009, 07:59:03 GMT (Associated Press Report).

Swiss court approves Polanski release on multi‑million dollar bail. A Swiss criminal court has approved famed French cinematic figure Roman Polanski’s bail offer of $4.5 million. The Swiss government has agreed to release him from prison but wishes to keep him under house arrest at his Swiss chalet with electronic monitoring. The Swiss Justice Ministry, however, announces that it will keep Polanski in jail until it decides whether to appeal his release to the highest Swiss court. A Ministry spokesman reports that the ministry will make its decision “quickly,” even though it has 10 days to appeal. The Swiss Criminal Court reportedly considers Polanski a high flight risk. Its Wednesday ruling, however, said that his new bail offer was significant enough to offset those concerns. This decision does not affect the Swiss government’s ongoing assessment of whether it should extradite Polanski to the United States for having sex in 1977 with a 13‑year‑old girl. He had allegedly pled guilty to the California charge but, prior to his sentencing, he had fled the United States to France, one of those nations that decline to extradite its own citizens. Citation: The Associated Press, Geneva, Switzerland, Wednesday, November 25, 2009 at 15:25:53 GMT.

Major Swiss Bank releases names of allegedly serious dodgers of United States tax laws. In August 2009, Switzerland agreed to hand over details about the accounts of up to 4,450 American suspected of serious evasions of their U.S. taxes. UBS (Union Bank of Switzerland) admitted that for years its advisers had been helping thousands of American clients hide billions of taxable dollars from the Internal Revenue Service (IRS). The move was widely viewed as a substantial break with Switzerland’s well‑known tradition of banking secrecy for foreigners; it coincides with a broader effort to shake off the Alpine country’s image as an uncooperative tax haven following sustained pressure from Washington and other major governments. Swiss authorities have until the end of August 2010 to hand the names over to their U.S. counterparts. The U.S. ambassador to Bern, Donald S. Beyer Jr., estimated last week that some 9,000 Americans with offshore accounts in Switzerland had already come forward voluntarily to take advantage of a U.S. government amnesty program. The program promised no jail time and reduced penalties for Americans who turned themselves in for failing to report foreign bank accounts. International monetary fluctuations cause the foreign equivalent amounts in U.S. dollars to vary widely. For instance, the dollar has lost substantial value against the Swiss franc in the last seven years. One could exchange one million Swiss francs for about $600,000 in 2001, while seven years later they were worth over $900,000. Citation: Associated Press (online), Bern, Switzerland, Tuesday, November 17, 2009 (Balz Bruppacher, Associated Press Writer).