2009 International Law Update, Volume 15, Number 3 (March)

2009 International Law Update, Volume 15, Number 3 (March)

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

FORUM NON CONVENIENS

Where Irish Company filed first‑time suit against two English companies in Georgia federal court alleging securities fraud under U.S. statutes and common law and English companies sued Irish company in Irish courts denying commission of substantially same frauds, Supreme Court of Ireland held that, since case originally filed in non‑Contracting State, European Court of Justice precedent failed to resolve availability of lis alibi pendens defense under Community Law, making it necessary to submit question to that Court for resolution under Article 234 of the Treaty

In this Irish litigation, Goshawk Dedicated Ltd., and Kite Dedicated Ltd., are the Plaintiffs. Life Receivables Ireland Limited, is the Defendant. The Plaintiffs are companies incorporated in England. The Defendant is an Irish company and a subsidiary of International Investment and Underwriting. Plaintiffs filed these proceedings in Ireland by way of a plenary summons issued on September 6, 2007.

Defendant, however, had already sued the Plaintiffs on June 29, 2007 in the U.S. District Court in Georgia. In those proceedings, the Defendant seeks certain remedies against the present Plaintiffs and against others who are not party to these Irish proceedings. Those proceedings seek relief for, inter alia, alleged misrepresentation, fraud, securities fraud, and other relief.

The Plaintiffs here seek a series of negative declarations in the Irish proceedings that mirror the relief sought in the Georgia federal court, except that the parties are reversed. The relevant subject matter involves (a) the Defendant’s purchase of a partnership interest in Life Receivable II, LLP; (b) a series of contingent cost insurance policies underwritten and issued by the first and second named Plaintiffs between September 2000 and early 2003, (c) in the management of the run off of Syndicate 102. The prior Georgia proceedings, therefore, relate to the same matters.

The issue that arises at this stage between the parties concerns the proper interpretation of Regulation 44/2001 of December 22, 2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial matters ([2001] O.J. L12/1), the “Brussels I” Regulation).

The Defendant moved the Irish High Court for an order staying these Irish proceedings, pending the final determination of the U.S. proceedings . The High Court denied the application on April 22, 2008, following upon the judgment delivered on February 27, 2008. This is an appeal by the Defendant from the order and judgment of the High Court.

The facts found by the High Court judge are as follows. The Defendant is incorporated in, and has its principal place of business in, Ireland. The Plaintiffs are companies incorporated in England and have their principal places of business in London. In June 2005, the Defendant bought a partnership interest in a Delaware partnership known as Life Receivables II LLP. The Defendant and Life Receivables Holdings are the only partners but the Defendant would appear to be the only partner with a financial stake. The partnership is, in turn, a beneficiary of Life Receivables Trust; the extent of its commercial value derives from trust property, being life insurance policies bought in the early years of this decade together with a contingent cost insurance issued by Plaintiff Goshawk with respect to those policies.

The Defendant (as plaintiff in the U.S. proceedings) alleged that Defendant’s misrepresentation in the U.S. proceedings induced it to buy into the partnership The present Defendant has launched proceedings in Georgia against the Plaintiffs and a number of others who were involved in a series of transactions which were at the heart of the dispute between the parties.

The complaint in the Georgia proceedings, briefly, alleges securities fraud under U.S. statutory law, common law fraud, negligent misrepresentation and conspiracy to commit fraud in connection with a transaction involving more than U.S. $14 million. The primary jurisdiction invoked arises under U.S. securities fraud law and a supplemental jurisdiction is alleged over the common law claims, again pursuant to U.S. law.

Apart from the securities claims, one of the major allegations made is that Plaintiff Goshawk, relied on fraudulent material furnished through, or by, American Viatical Services. The latter is an actuarial company located in Atlanta, Georgia. It allegedly made representations appearing on the face of the life policies to persons including Life Receivables, the Defendant in the Irish proceedings. It is also alleged that Cavell, acting through one of its principals, devised a run‑off scheme to commute Goshawk’s obligations to, inter alia, Life Receivables. It is alleged that, at certain times, that principal, acting on behalf of both Goshawk and Cavell, made material misrepresentations and omissions.

The proceedings that Defendant filed in Georgia are clearly first in time. On September 6, 2007, the Plaintiffs commenced these Irish proceedings ; they seek declarations that the Plaintiffs did not make the alleged misrepresentations, together with other similar relief,. The Irish proceedings are a mirror image of the Georgia proceedings, except that none of the additional co‑Defendants in Georgia are parties in the Irish proceedings. On September 5, 2007, the Plaintiffs here moved in the U.S. Court to dismiss the Defendant’s complaint. They argued that that court lacks “subject matter jurisdiction” over the Defendants because the transactions in issue are “predominantly foreign” and lack the necessary domestic effects to permit that court to apply American securities laws. The Defendant in these proceedings opposed that motion, and a ruling by the U.S. District Court was, at the time of this appeal, awaited.

“Article 34 refers to the recognition of judgments between Member States and a third State. It provides: ‘A judgment shall not be recognised: ... ‘ if it is irreconcilable with an earlier judgment given in another Member State or in a third State involving the same cause of action and between the same parties, provided that the earlier judgment fulfils the conditions necessary for its recognition in the Member State addressed.’”

“In Owusu v Jackson (C‑281/02) [2005] E.C.R. I‑1383; [2005] I. L. Pr. 25, the ECJ considered the interpretation of art. 2 of the Brussels Convention. It first addressed the question: Does the Brussels Convention preclude a court of a Contracting State which is seised of an action against a person domiciled in the territory of that State and therefore has jurisdiction to hear such an action on the basis of art. 2 from exercising, under its national law, a discretion to decline to exercise such a jurisdiction, on the ground that a court of a non‑Contracting State would be a more appropriate forum to determine the dispute?”

“The ECJ [then] considered the doctrine of forum non conveniens and the Brussels Convention. That Court held: ‘38. Respect for the principle of legal certainty, which is one of the objectives of the Brussels Convention [Cites] would not be fully guaranteed if the court having jurisdiction under the Convention had to be allowed to apply the forum non conveniens doctrine.’”

“‘According to its preamble, the Brussels Convention is intended to strengthen in the Community the legal protection of persons established therein, by laying down common rules on jurisdiction. These seek to guarantee certainty as to the allocation of jurisdiction among the various national courts before which proceedings in a particular case may be brought.’”

“The Court has thus held that the principle of Legal Certainty requires, in particular, that the jurisdictional rules which derogate from the general rule laid down in art.2 of the Brussels Convention should be interpreted in such a way as to enable a normally well‑informed Defendant reasonably to foresee before which courts, other than those of the State in which he is domiciled, he may be sued.” [Cites].

“Application of the forum non conveniens doctrine, which allows the seised court a wide discretion as regards the question whether a foreign court would be a more appropriate forum for the trial of an action, is liable to undermine the predictability of the rules of jurisdiction laid down by the Brussels Convention, in particular that of art.2, and consequently to undermine the principle of legal certainty, which is the basis of the Convention.”

“ The legal protection of persons established in the Community would also be undermined. First, a Defendant, who is generally better placed to conduct his defence before the courts of his domicile, would not be able, in circumstances such as those of the main proceedings, reasonably to foresee before which other court he may be sued. Second, where a plea is raised on the basis that a foreign court is a more appropriate forum to try the action, it is for the claimant to establish that he will not be able to obtain justice before that foreign court or, if the court seised decides to allow the plea, that the foreign court has in fact no jurisdiction to try the action or that the claimant does not, in practice, have access to effective justice before that court, irrespective of the cost entailed by the bringing of a fresh action before a court of another State and the prolongation of the procedural time‑limits.”

“Moreover, allowing forum non conveniens in the context of the Brussels Convention would be likely to affect the uniform application of the rules of jurisdiction contained therein in so far as that doctrine is recognised only in a limited number of Contracting States, whereas the objective of the Brussels Convention is precisely to lay down common rules to the exclusion of derogating national rules.’[¶¶ 37‑43].

“. ... [S]uch considerations, which are precisely those which may be taken into account when forum non conveniens is considered, are not such as to call into question the mandatory nature of the fundamental rule of jurisdiction contained in art.2 of the Brussels Convention . ...’

“In the light of all the foregoing considerations, the answer to the first question must be that the Brussels Convention precludes a court of a Contracting State from declining the jurisdiction conferred on it by art.2 of that Convention on the ground that a court of a non‑Contracting State would be a more appropriate forum for the trial of the action even if the jurisdiction of no other Contracting State is in issue or the proceedings have no connecting factors to any other Contracting State.’” [¶¶ 37‑43]’”

¶40 “The second question here was hypothetical in the circumstances of that case. It raised the issue, inter alia, of proceedings pending before non Contracting states. The European Court of Justice declared that: “

¶41 “Two primary issues arise in this case for decision. At the commencement of the appeal, ... [Defendant] confirmed that he was not seeking to rely on a discretionary jurisdiction of the type contended for in the Owusu case, the judgment in which he accepts as dealing definitively with that question. He argues that Owusu is of interest only in relation to the clarification tendered by the ECJ on the discretion claimed to have existed at common law under the doctrine forum non conveniens , and to the approach of the ECJ to the second question which was posed, but not responded to.”

¶42 “The Defendant has relied, for its primary submission, on the doctrine of lis alibi pendens which, it is argued, is given explicit recognition in the Brussels I Regulation (albeit in the context of a contest between proceedings commenced in two different Member States). Counsel contends that, even if he is wrong in his submission as to the existence and application of the doctrine of lis alibi pendens, there may remain an aspect of the forum non conveniens doctrine available to the court. In that regard he submits that art.2 of the Brussels I Regulation is the primary rule as to jurisdiction. Articles 27 to 30 deal only with jurisdiction as between Member States, but not between Member States and third party States.”

“The declarations sought in the present proceedings are a mirror image of the claims in the U.S. proceedings. The determination of the ECJ in Owusu, which determined the position where there were no proceedings in being, is not sufficiently clear to enable this court to resolve the issues between the parties, without a reference to the ECJ, pursuant to art.234 of the Treaty, the ECJ having expressly declined to rule on the issue arising in the present appeal, and there is therefore no guidance in the case law of the ECJ upon which this Court may with certainty rule on the issue.”

¶43 “Reference was made also to Recital 15 and the words ‘there must be a clear and effective mechanism for resolving cases of lis pendens ...’ and to ‘... national difference as to the determination of the time when a case is regarded as pending’. The Court was referred to academic authors, and to contrary approaches or to views taken that the Brussels I Regulation does not preclude the application of [the] lis alibi pendens rule in circumstances where the first court seised is a non‑Member State. On the one hand a reflexive application of arts 27 and 28 was advocated, rather than pre‑existing national principles of lis alibi pendens . Thus it was submitted that in circumstances such as arise in this case the Member State may apply rules analogous to those in arts 27‑30.”

¶44 “On the other hand, it was submitted that if, a reflexive interpretation of arts 27 and 28 is not adopted, the Brussels I Regulation still does not preclude the exercise of the Court’s discretion at common law to stay the proceedings pursuant to the doctrine of lis alibi pendens. Counsel argued that the learned trial judge was wrong in law to refuse to exercise his discretion to do so because the doctrine is not, or is not only, a common law doctrine, but rather a well established civil law doctrine expressly recognised in the Regulation and prior to that in the Brussels Convention , as is clear from Recital 15 and the title to Section IX, and is the subject of, inter alia, the ‘Schlosser Statement.’”

¶45 “Owusu v. Jackson (C‑281/02) [2005] E.C.R. I‑1383; [2005] I.L.Pr. 25 is the most relevant case law, but it was limited to the facts of that case, which are not similar to the circumstances of this case, and indeed the circumstances of this (the pending case) are expressly excluded. In this case there is a pending proceeding which is first in time, in a non‑Contractual State. It is a situation identified in Owusu, but expressly not answered. In these circumstances the issue may not be considered acte clair .”

¶46 “[This ] Court is satisfied that it is necessary to refer the question to the ECJ. ... However, in essence such a reference would query whether, when a Defendant is sued in its country of domicile, it is inconsistent with Regulation 44/2001 for the court of a Member State to decline jurisdiction or to stay proceedings on the basis that proceedings between the same parties and involving the same cause of action are already pending in the courts of a non‑Member State and therefore first in time. It may be necessary also, having regard to the absence of any clear guidance, to pose an additional question concerning the criteria to be applied by a Member State coming to a decision whether to stay pending proceedings in a Member State, depending on the response to the first, primary, question to be posed.”

Citation: Goshawk Dedicated Ltd. v. Life Receivables Irl. Ltd.,[2009] I.E.S.C. 7; 2009 WL 1403581 (Sup. Ct. (Irl.)); [2009] I.L.Pr. 26 (Jan. 30, 2009).

POLITICAL QUESTION

District of Columbia Circuit rules, 2 to 1, that legality of 1998 United States missile strikes on Sudanese pharmaceutical factory with alleged terrorist ties presents non‑justiciable Political Question

The owners of a pharmaceutical plant in Sudan (Plaintiffs) sued the U.S. (Defendant) after the U.S. destroyed it with missiles in 1998. The U.S. President had ordered the missile strike shortly after the terrorist attacks on the U.S. embassies in Kenya and Tanzania because of the plant’s alleged connections to Osama bin Laden.

Plaintiffs first sued in the U.S. Court of Federal Claims, seeking compensation under the Takings Clause of the Constitution. The Court dismissed that lawsuit as non‑justiciable, and the U.S. Court of Appeals for the Federal Circuit affirmed. See El‑Shifa Pharm. Indus. Co. v. United States, 378 F.3d 1346 (Fed. Cir. 2004). See also 2004 International Law Update 124.

Eventually, Plaintiffs filed the present lawsuit in the District of Columbia federal court seeking $50 million in damages. Plaintiffs also sought declaratory judgments that the defamatory statements linking them to “Osama bin Laden, international terrorist organizations and the production of chemical weapons” were false, and that the U.S. government’s refusal to compensate them violates the Law of Nations.

The district court dismissed for lack of subject matter jurisdiction because the 1976 Foreign Sovereign Communities Act (FSIA), 28 U.S.C. §§ 1602‑1611, bars these claims. The district court also pointed out that the lawsuit presented a non‑justiciable Political Question. Plaintiffs appeal the dismissal of the equitable claims regarding defamation and the Law of Nations. The U.S. Court of Appeals for the District of Columbia Circuit, however, affirms.

“Although plaintiffs attempt to distance their law of nations and defamation claims from the nonjusticiable question of why the President ordered the missile strike, both claims nonetheless present questions ‘inextricably intertwined’ with the underlying [political] decision to attack the El‑Shifa pharmaceutical plant. Plaintiffs’ law‑of‑nations claim asserts that, under customary international law, a state must compensate a foreign national for the unjustified destruction of his or her property. Plaintiffs allege that the United States breached this principle by failing to compensate them for the destruction of their plant. In passing judgment on this claim, the district court could not avoid becoming arbiter of the President’s battlefield actions and would need to determine whether his decision to bomb the plant was justified. ...”

“This a court cannot do. We have consistently held that courts are not a forum for second‑guessing the merits of foreign policy and national security decisions textually committed to the political branches. See Gonzalez‑Vera v. Kissinger, 449 F.3d 1260, 1263‑64 (D.C. Cir. 2006) (dismissing a suit concerning alleged unlawful U.S. assistance to the Pinochet regime because the challenged actions ‘were inextricably intertwined with the underlying’ foreign policy decisions constitutionally committed to the political branches’ ... This precedent controls our decision here. Plaintiffs’ law of nations claim asks us to review whether the President was justified in striking the El‑Shifa plant. Courts have no business hearing such claims. ...” [Slip op. 7‑8].

Similarly, Plaintiffs’ defamation claim would require the court to review whether the Government’s statements in justifying the attack were false. Therefore, the court would have to review whether the Plaintiffs are in fact associated with Osama bin Laden or any terrorist organization. Thus, it would be a Political Question matter.

The Dissenter opines that the U. S did violate the law of nations by striking the plant and by failing to provide compensation, but that the Plaintiffs waived the issue. The Court should remand the defamation claim to the district court for further proceedings because it does not necessarily raise a Political Question.

As for the defamation issue, the Dissenter argues that “the Court errs in believing [Plaintiffs’] claim necessarily raises a Political Question simply because it implicates a strategic decision. Apparently the Court believes the Constitution grants the Executive the unreviewable discretion to make defamatory statements even if they have nothing to do with the actual justification for a military decision because (or so the Court assumes) every public explanation of a military decision is ‘offered, in part at least, with strategic ... objectives in mind.’ ... That proposition is not only novel and frightening, it ignores Supreme Court precedent. ...”

Here, [Plaintiff] assert[s] [that] the CIA had a duty under both the common law and an Act of Congress (the APA) not to spread false information about him; if [they are] correct, then [they] should be able to call upon the courts to provide [him] the statutory remedy [he] seeks, see Baker v. Carr, 369 U.S. 186, 211 (1962) (‘it is error to suppose that every case or controversy which touches foreign relations lies beyond judicial cognizance’).” [Slip op. 20‑21]

Citation: El‑Shifa Pharmaceutical Industries Co. v. United States, 559 F.3d 578 (D.C. Cir. 2009).

SERVICE OF PROCESS (INTERNATIONAL)

Paris Court of Appeal holds that French Plaintiffs’ failure to have civil complaint, otherwise proper in form, delivered to California Defendant in time for Defendant to prepare its defense violated Principle of Contradictory Proceedings

This is an appeal from a judgment of the Paris District Court (Tribunal de Grande Instance) dated June 22, 2007. The Court handed down its judgment in the course of infringement proceedings between M. Jean‑Yves X, the author and performer of sketches for radio and television (Plaintiff) and MYSPACE Inc, an American company (Defendant) headquartered in California. The Defendant ran an internet website describing itself as “... a social network service which allowed its members to create unique personal profiles online in order to communicate with old and new friends.”

The Plaintiff complained that, without his consent, a page dedicated to him appeared on the Defendant’s website. It included his photograph, personal information about him, plus interviews and video recordings of his sketches. He filed proceedings in the Paris court claiming breach of copyright and infringement of his moral rights.

He obtained from the Paris interlocutory judge leave to serve a summons upon the American company abroad requesting the latter to appear before the Paris court on a specified date. The leave included a condition that the summons be “delivered” to the Defendant by a certain date at the latest. The court sent the summons to the appropriate American International Process Forwarding Authority (IPFA) with a request to see to it that it gets served on the Defendants, and on the same date it was mailed from Paris to the Defendants.

The IPFA acknowledged receipt of the summons. It refused to serve it on the Defendants, however, because IPFA did not think it would give the Defendants enough time to prepare their defense. The IPFA also asked for the issuance of a new summons and the setting of a new hearing date. The Paris judge entered an order against the Defendant.

It took an appeal, and applied for it to be set aside on the ground that they had not been properly served with the document instituting the proceedings. They claimed in particular that they had not gotten notice of the mailed document because no member of Defendant’s management had acknowledged receipt of it as apparently required by California law.

The document instituting the proceedings had clearly failed to reach its addressee before the date the President of the Paris District Court had expressly specified as a condition upon his giving leave to summon the Defendant. Because the said leave had thus lapsed after that date, the proceedings that followed ceased to have, as of that moment, any legal basis.

The late delivery of the summons (which was concededly proper in form) amounted to a breach of the principle of Contradictory Proceedings. That Principle ( principe du contradictoire) apparently requires that all parties to a French civil action be involved in the proceedings, having been properly served and given a chance to make their submissions and their exchanges of evidence.

Applicable in cases like this, the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters [20 U.S.T. 361; T.I.A.S. 6638; 658 U.N.T.S. 163 ; done November 15, 1965; entered into force between France and United States on September 1, 1972]. The Plaintiffs urged that they had complied with the Convention by using the semi‑direct procedure provided, and by sending the required documents to the IPFA and by notifying Defendant of the proposed hearing date. In exceptional circumstances, the Hague Convention provides for the possibility of a direct communication by post.

The French Court of Appeal rules against the Plaintiffs. “A judge dealing with interlocutory matters must, as any judge must, respect the principle of Contradictory Proceedings and make sure it is observed; it must check that the addressee of a summons making him a party to [French] proceedings, had knowledge of it in proper time; he must also be satisfied, in accordance with the provisions of art.486 of the Code of Civil Procedure, that sufficient time elapsed between the summons and the hearing to allow the summoned party to prepare [its] defence.”     

“In giving leave, on May 10, 2007, to M. X ... and the limited company X ... to summon MYSPACE in the United States to appear [at the Paris forum] on a fixed date, at a hearing which was to take place the following June 15, the President of the Paris District Court only gave that leave subject to the ‘delivery’ of the summons before May 16, 2007, at 1400 hrs, that condition being explained by the concern to comply with the principle of Contradictory Proceedings.”

 “In accordance with the provisions of art.653 of the Code of Civil Procedure it follows from the Decree 2005‑1678 of December 28, 2005, that the notification of a document only results from its delivery to the addressee.”

“In the present case, it is established that the document instituting the proceedings was addressed by a bailiff, at the request of the Plaintiffs, ... on May 15, 2007, to the authority in the United States with jurisdiction to notify such a document, that authority having acknowledged its receipt on May 23, 2007; the said authority did not transmit it to MYSPACE, its only addressee.”

 “It is also established that the said document was addressed, according to the terms of the sender bailiff’s attached letter, for (its) information, to MYSPACE, by post on May 15, 2007, that document having been received by its addressee on the following May 21.”

“... [I]t must be recognised that this document instituting the proceedings, had not been delivered to its addressee before May 16, 2007 at 1400 hours, [the] condition imposed by the President of the Paris District Court upon his giving leave to summon.”

 “The said leave, having thus lapsed after May 16, 2007, at 1400 hrs, the proceedings which followed no longer had, as from that moment, any legal basis; the late delivery of the summons did not result in it being null as regards its form, but amounted to a breach of the principle of Contradictory Proceedings. It follows that the order complained of must be set aside, and a new ruling be given with a finding that the proceedings had not been properly started, because of the breach of the principle of Contradictory Proceedings.” [¶¶ 13‑20].

Citation: MYSPACE, Inc. v. X, [2009] I. L. Pr. 21; 2008 WL 5973788 (Cour d’Appel, Paris, 14th Chmbr.) (October 29, 2008).

SOVEREIGN IMMUNITY

Second Circuit holds that former director of Israeli Security Agency is immune from suit brought under ATCA and TVPA, for his official actions related to aerial bombing of Gaza City apartment complex, where U.S. Department of State recognized his entitlement to immunity, but declines to rule on categorical immunity for former officials under FSIA

On July 22, 2002, an Israeli Defense Force aircraft bombed an apartment complex in Gaza City in a successful attempt to kill alleged Hamas leader Saleh Mustafah Shehadeh. The attack killed fourteen additional people and injured numerous others. In December 2005 individuals injured in the attack and representatives of others killed or injured in the attack (Plaintiffs) sued Avraham Dichter (Defendant), the former director of the Israeli Security Agency, in New York federal court. Plaintiffs allege that Defendant is liable pursuant to the Alien Tort Claims Act (ATCA) and the Torture Victims Protection Act (TVPA), 28 U.S.C. § 1350 & note, for war crimes and other violations of international law.

Defendant moved to dismiss the suit arguing that he is immune from prosecution under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1602‑1611, that the Act of State doctrine barred suit and that it also presents a non‑justiciable Political Question. The U.S. State Department filed a Statement of Interest in November 2006 arguing that the FSIA applied only to countries and not to individuals. The statement, however, further argued that Defendant was immune under the common law as an official of a foreign state.

The district court granted Defendant’s motion to dismiss, holding that Defendant was immune under the FSIA as an “agency or instrumentality of a foreign state” and, in the alternative, the suit raised a non‑justiciable political question. The district court did not rule on the State Action doctrine. Plaintiffs appealed to the U.S. Court of Appeals for the Second Circuit.

The Second Circuit affirms on the grounds of common law immunity. It does not reach the issue, however, of whether the case presents a non‑justiciable Political Question.

The FSIA grants immunity from suit to foreign sovereigns, unless certain exceptions apply. In this case the Plaintiffs have not pointed to any exceptions to the statutory immunity. Thus the FSIA question rests solely on the issue of Defendant’s status as an “agency or instrumentality of a foreign state.” Plaintiffs had argued that the FSIA did not apply to individual foreign officials. After the briefs on appeal were filed, but before the oral argument, the Second Circuit ruled, in another case, that “an individual official of a foreign state acting in his official capacity is the ‘agency or instrumentality’ of the state, and is thereby protected by the FSIA.” See In re Terrorist Attacks on September 11, 2001, 538 F.3d 71, 81 (2d Cir. 2008).

Plaintiffs tried to distinguish the Terrorist Attacks holding by contending that the FSIA does not grant him immunity since Defendant was no longer an official of the Israeli government at the time Plaintiffs filed the suit. They maintain that the courts determine whether a foreign official is an instrumentality of a foreign state at the time that the suit is filed and not at the time that the actionable wrong took place. Plaintiffs rely on Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), in which the Supreme Court had held that courts should determine a corporation’s status as of the time that the plaintiff filed suit. The Court declined to rule on whether this rule applied to foreign officials because the common law endowed this Defendant with immunity.

The Circuit Court finds that the FSIA provides no guidance on the question of a former foreign government official’s immunity. The Circuit Court therefore looks to the common law to determine the question. The common law of foreign sovereign immunity recognizes a right to immunity for former foreign officials for acts performed in their official capacity. At common law, courts left the decision of immunity for foreign sovereigns to the political branches of government, especially the Executive Branch. Because the State Department had recognized Defendant’s immunity, the Circuit Court holds that the Defendant is immune from suit under the common law, although the Circuit Court does not go so far as to hold that all former foreign officials enjoy categorical immunity.

“Common law recognizes the immunity of former foreign officials. At the time the FSIA was enacted [in 1976], the common law of foreign sovereign immunity recognized an individual official’s entitlement to immunity for ‘acts performed in his official capacity.’ Restatement (Second) of Foreign Relations Law of the United States § 66(f) (1965) ... An immunity based on acts – rather than status – does not depend on tenure in office.”

“Is Defendant entitled to common‑law immunity? Prior to the enactment of the FSIA, we ‘deferred to the decisions of the political branches —in particular, those of the Executive Branch—on whether to take jurisdiction over actions against foreign sovereigns and their instrumentalities.’ [Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 486, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983)]. The United States – through the State Department and the Department of Justice – filed a Statement of Interest in the district court specifically recognizing Defendant’s entitlement to immunity and urging that appellants’ suit ‘be dismissed on immunity grounds.’ Accordingly, even if Defendant, as a former foreign official, is not categorically eligible for immunity under the FSIA (a question we need not decide here), he is nevertheless immune from suit under common‑law principles that pre‑date, and survive, the enactment of that statute.” [Slip op. 12‑14]

Plaintiffs further argue that Defendant’s actions violate jus cogens (imperative international law norms) and that there can be no immunity for such violations. The Circuit Court rejects this argument finding no exception to the FSIA or common law immunity in cases of jus cogens. The Circuit Court also rejects Plaintiffs’ argument that the TVPA overrides Defendant’s immunity. The TVPA only applies when one of the FSIA exceptions of 28 U.S.C. § 1605 exists. Further, under the common law, the TVPA will only apply when the Executive declines to immunize an official.

“In summary, we need not decide whether the FSIA applies to a former official of a foreign government (a close and interesting question), because if the FSIA does not apply, a former official may still be immune under common‑law principles that pre‑date, and survive, the enactment of the FSIA.”

“Here, the Executive Branch has urged the courts to decline jurisdiction over appellants’ suit, and under our traditional rule of deference to such Executive determinations, we do so. We therefore affirm the judgment of the district court dismissing Appellants’ complaint for lack of jurisdiction; and because we decide the appeal on immunity grounds, we need not reach the district court’s alternative holding that the case raises a non‑justiciable Political Question.” [Slip op. 16]

Citation: Matar v. Dichter, 563 F.3d 9 (2d Cir. 2009).

SOVEREIGN IMMUNITY

Ninth Circuit finds that Holy See is not immune under Foreign Sovereign Immunities Act of 1976 for certain causes of action based on alleged sexual abuse committed by parish priest within United States

John Doe (Plaintiff) filed a lawsuit in Oregon district court against the Archdiocese of Portland, Oregon (Archdiocese), the Catholic Bishop of Chicago (Chicago Bishop), and the Order of the Friar Servants (Order), alleging that Father Andrew Ronan, a priest in the Archdiocese and a member of the Order sexually abused him when he was 15 or 16 years old. According to the complaint, after sexually abusing boys in other locations, the Holy See (Defendant) and the Order “placed” Ronan as a parish priest at St. Albert’s Church in Portland, Oregon. Ronan was Plaintiff’s “priest, counselor and spiritual advisor,” and later allegedly used that position to perform sexual acts with Plaintiff.

Plaintiff’s causes of action against the chief Defendant are: (1) vicarious liability for the actions of the Defendant’s instrumentalities; (2) respondeat superior liability for the actions of Ronan, the Defendant’s employee; and (3) direct liability for the Defendant’s negligent retention and supervision of Ronan and its negligent failure to warn Plaintiff of Ronan’s proclivities. The Defendant claimed sovereign immunity and moved to dismiss.

The district court disagreed and found that it had jurisdiction over almost all of Plaintiff’s claims based on the FSIA’s tortious act exception to sovereign immunity. The Defendant noted its appeal. The U.S. Court of Appeals for the Ninth Circuit, in a per curiam opinion, affirms in part and reverses in part.

The Court concludes that Plaintiff has not alleged enough facts to overcome the presumption of separate juridical status for governmental instrumentalities, and thus the law cannot attribute the negligent acts of those entities to the Defendant for jurisdictional purposes. Thus, Plaintiff’s claims of vicarious liability cannot proceed. Plaintiff has sufficiently alleged that Ronan was an employee of the Defendant acting within the “scope of his employment” under Oregon law, and thus Ronan’s acts can be attributed to the Defendant for jurisdictional purposes under respondeat superior liability.

Furthermore, Ronan’s alleged acts came within the FSIA’s tortious act exception, and the Defendant is thus not immune from suit for the respondeat superior cause of action. Plaintiff’s negligence claims under the FSIA’s tortious act exception, however, cannot proceed because the FSIA preserves immunity for discretionary acts. The Court thus may not adjudicate Plaintiff’s allegations under the FSIA “commercial activity” exception.

The Circuit Court then determines which acts the law may attribute to the Defendant for jurisdictional purposes. Plaintiff alleges that Defendant created the following institutions: the Archdiocese, the Order and the Bishop. The Defendant argues that Plaintiff failed to allege enough facts to overcome the presumption of the separate juridical status of those institutions.

While the Court agrees with the Defendant in this respect, it concludes that certain acts of the Defendant, including the creation of Archdioceses and religious orders, approving the creation and division of such institutions, and “placing” Ronan in the Archdiocese in Oregon, do create jurisdiction over the Defendant.

“In arguing that the actions of the corporations are not attributable to Holy See for purposes of determining jurisdiction, the Holy See relies on First Nat. City Bank v. Banco Para el Comercio Exterior de Cuba (‘Bancec’), 462 U.S. 611 (1983). In Bancec, the Supreme Court considered whether an instrumentality created by a foreign state could be held liable for the actions of the foreign state itself, a question the reverse of ours. .... “ [...] Surveying international and federal law on the status of corporations, the Supreme Court recognized a presumption of ‘separate juridical [status]’ for the instrumentalities of foreign states. Id. at 624, 624‑28.”

“That presumption can be overcome, the Court explained, in two instances: [1] when ‘a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created,’ or [2] when recognizing the separate status of a corporation ‘would work fraud or injustice.’ Id. at 629. [...]”

“The Supreme Court in Bancec did not have the opportunity to consider whether the actions of a corporation may be attributed to the sovereign —the reverse of the Bancec scenario—for purposes of determining whether jurisdiction over that sovereign exists. This Circuit has not previously addressed that question either. ... At least two other circuits, however, faced with such a scenario, have applied Bancec’s substantive corporate law principles in determining whether jurisdiction exists under the FSIA.” [...]

“We join the D.C. Circuit and the Fifth Circuit in extending Bancec’s analysis to the question [of] whether the actions of a corporation may render a foreign sovereign amenable to suit. A foreign state can only ‘act[ ] through its agents,’ be they corporations or individual people. ... Therefore, in applying the jurisdictional provisions of the FSIA, courts will routinely have to decide whether a particular individual or corporation is an agent of a foreign state.”

“Bancec provides a workable standard for deciding this question. Applying Bancecs’s presumption in favor of separate juridical status for foreign state instrumentalities at the jurisdiction phase, not just at the liability phase, is consistent with the FSIA’s broad policy goals. In Bancec, the Court discussed at length the comity considerations at play when entertaining suits against foreign government instrumentalities in U.S. courts. supra at 626 ...”

“As at the merits phase, failing to recognize the presumption of separate juridical status at the jurisdictional phase could ‘result in substantial uncertainty over whether an instrumentality’s assets would be diverted to satisfy a claim against the sovereign,’ and might frustrate ‘the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration.’ Bancec, supra at 626. Applying Bancec’s presumption—as well as the standard for overcoming that presumption—at the outset of a suit as well as at the merits phase makes good sense.”

“With these considerations in mind, we conclude that it is appropriate to use the Bancec standard to determine whether Doe’s allegations are sufficient to permit jurisdiction over the Holy See based on acts committed by its affiliated domestic corporations.” [Slip op. 18‑21] The Court then finds that Doe has not alleged sufficient facts to overcome the presumption of separate juridical status.

“In Flatow v. Islamic Republic of Iran, 308 F.3d 1065 (9th Cir. 2002), we applied Bancec to the relationship between the Iranian government and the Bank Saderat Iran (‘BSI’). BSI was created by the Iranian government and fully owned by it. Id. at 1072‑73. Its actions were regulated by Iran’s General Assembly of Banks and High Council of Banks, which reviewed BSI’s annual statements and ‘perform[ed] broad policymaking functions.’ Id. at 1073. Flatow held these facts insufficient to overcome the presumption of separate juridical status, because the government’s ‘involvement [did not] rise to a [sufficiently] high[ ] level,’ and in particular, did not involve ‘day‑to‑day’ control. Id. (citing McKesson Corp v. Islamic Republic of Iran, 52 F.3d 346, 351‑52 (D.C. Cir. 1995) (holding the presumption of separateness overcome where Iran controlled routine business decisions, such as declaring and paying dividends and honoring contracts).”

“Doe’s complaint does not allege day‑to‑day, routine involvement of the Holy See in the affairs of the Archdiocese, the Order, and the Bishop. Instead, it alleges that the Holy See ‘creates, divides[,] and re‑aligns dioceses, archdioceses and ecclesiastical provinces’ and ‘gives final approval to the creation, division or suppression of provinces of religious orders.’ Doe also alleges that the Holy See ‘promulgates and enforces the laws and regulations regarding the education, training[,] and standards of conduct and discipline for its members and those who serve in the governmental, administrative, judicial, educational[,] and pastoral workings of the Catholic [C]hurch world‑wide.’ These factual allegations – that the Holy See participated in creating the corporations and continues to promulgate laws and regulations that apply to them – are quite similar to the facts in Flatow, and are, as in Flatow, insufficient to overcome the presumption of separate juridical status.” [Slip op. 22]

“... Doe has not alleged that the Holy See has inappropriately used the separate status of the corporations to its own benefit, as in Bancec, or that the Holy See created the corporations for the purpose of evading liability for its own wrongs. Rather, in ruling for Doe on this point, the district court seemed to be influenced by the complaint’s allegations of wrongful acts perpetrated directly by the Holy See. ... The existence of such direct wrongful acts cannot determine whether the distinct wrongful acts of the affiliated corporations should also be attributed to the Holy See.” [Slip op.23‑24]

“Doe’s vicarious liability claim for the actions of the [Holy See’s] Archdiocese, Chicago Bishop, and Order is based entirely on an allegation that the actions of the domestic corporations are attributable to the Holy See. Doe has therefore not alleged sufficient facts to demonstrate that any exception to sovereign immunity applies to that cause of action. We therefore conclude that the district court lacked jurisdiction over the Holy See for the tortious acts allegedly committed by the Archdiocese, the Chicago Bishop, and the Order. [Slip op. 22‑24]

The Court then turns to Doe’s respondeat superior allegations and whether they are sufficient to support jurisdiction over the Holy See. “The district court held that all of Doe’s claims, except the one for fraud, come within the exception to immunity for a ‘tortious act or omission of [a] foreign state or of any official or employee of that foreign state while acting within the scope of his or her employment.’ § 1605(a)(2); [Cite] We agree in part.”

“Doe’s respondeat superior claim based on Ronan’s actions comes within the Tortious Act exception. Doe has clearly alleged that Ronan was an employee of the Holy See, acting within the scope of his employment, when he molested Doe. We conclude, however, that Doe’s claims against the Holy See for negligent retention and supervision and failure to warn cannot be brought under the tort exception because they are barred by the FSIA’s exclusion for discretionary functions, § 1605(a)(5)(A).” [...] [Slip op. 24]

“In his complaint, Doe alleges that the Holy See ‘employed priests, including one Father Andrew Ronan’ and that Ronan was under the ‘direct supervision and control’ of the Holy See. The Holy See was further ‘responsible for the work and discipline [of] . . . priests.’ According to the complaint, the Holy See, on at least one occasion, was responsible for controlling where Ronan performed his functions: the Holy See ‘placed Ronan in [the] Archdiocese at St. Albert’s Church in Portland, Oregon.’”

“The Holy See maintains that Doe has not alleged sufficient facts to demonstrate that Ronan was an ‘employee’ of the Holy See for purposes of the tortious act exception, because the word ‘employee’ is a legal conclusion we are not required to accept as true. We are highly skeptical of the notion that, under notice pleading, use of the word ‘employee’ in a complaint is insufficient to establish an allegation of an employment relationship. True, in addition to being a word used in everyday speech, ‘employee’ does have a common law legal definition. See, e.g., Schaff v. Ray’s Land & Sea Food Co., 45 P.3d 936, 939 (Ore. 2002) (defining ‘employee’ for purposes of Oregon law).”

“But then, of course, so do the words ‘person,’ ‘corporation,’ ‘citizen,’ and ‘molest,’ also used in this complaint – and, undoubtedly, in many other complaints filed each year in federal courts —without further definition. Were we to require that every such word used in a complaint be broken down into its constituent factual predicates, we would undermine the purpose of notice pleading—that is, ‘to focus litigation on the merits of a claim’ rather than on procedural requirements. ... Thus, while we do not accept Doe’s legal conclusions as true, we also do not engage in ‘a hypertechnical reading of the complaint inconsistent with the generous notice pleading standard.’” [Slip op. 24‑26]

Therefore, the FSIA tort exception does not cover most of Doe’s causes of action.

The Dissenter agrees that Doe’s negligence claims cannot proceed under the FSIA’s tortious act exception, but would affirm the district court’s holding that the Holy See is not immune from Doe’s claims of negligent retention, supervision, and failure to warn. Also, the Dissenter finds that the FSIA commercial activity exception does allow jurisdiction over Doe’s non‑fraud negligence claims.

Citation: Doe v. Holy See, 557 F.3d 1066 (9th Cir. 2009).

WORLD TRADE ORGANIZATION

World Trade Organization tribunal adopts Panel report in United States‑China dispute over intellectual property rights, agreeing to some extent with United States complaints

The World Trade Organization (WTO) has adopted the Report of the Dispute Settlement Panel circulated on January 26, 2009, in the U.S.‑China dispute over intellectual property rights. The U.S. claimed that China (Plaintiffs) does not adequately protect and enforce U.S. copyrights and trademarks.

The U.S. had brought the complaint before the WTO in April 2007, requesting consultations. Specifically, the U.S. claims that (1) China lacked criminal procedures and penalties for commercial counterfeiting and piracy, which is inconsistent with Articles 41.1 and 61 of the WTO Agreement on Trade‑Related Aspects of Intellectual Property Rights (TRIPS).

The U.S. alleges that China punishes trademark counterfeiting and copyright infringement only when the violators have exceeded certain thresholds; the TRIPS, however, arguably requires the punishment of all such infringements. (2) China allows the release of certain infringing goods seized at the border into the channels of commerce once the importer has removed the infringing trademarks; this is inconsistent with Articles 46 and 59 of the TRIPS . (3) China fails to provide the protections of the Berne Convention for the Protection of Literary and Artistic Works of 1896, as revised and amended until 1971 [in force for U.S. March 1, 1989] to works of those authors whose publications or distribution the government has not authorized; this does not square with Article 9.1 of the TRIPS.

The Panel found, in particular:

(a) that the Chinese Copyright Law, specifically the first sentence of Article 4, does conflict with China’s obligations under: (I) Article 5(1) of the Berne Convention (1971), as incorporated by Articles 9.1 and 41.1 of TRIPS.

(b) with respect to the Customs measures the Panel concludes: (I) that Article 59 of TRIPS does not apply to the Customs measures insofar as they apply to goods destined for export; (ii) that the United States has not shown that the Customs measures are at war with Article 59 of TRIPS, since it incorporates the principles set out in the first sentence of Article 46 of the TRIPS ; and (iii) that the Customs measures are inconsistent with Article 59 of the TRIPS, as it incorporates the principle set out in the fourth sentence of Article 46 of TRIPS.

(c) The Panel concludes that the United States has not established that the criminal thresholds conflict with China’s obligations under the first sentence of Article 61 of the TRIPS.

To the extent that the Chinese Copyright Law and the Customs measures are inconsistent with the TRIPS , they nullify or impair benefits accruing to the United States under that Agreement. The Panel thus recommends that China bring its Copyright Law and the Customs measures into conformity with its obligations under the TRIPS Agreement.

Citation: China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, Report of the Panel (WT/DS362/R) (26 January 2009). [The Report is available on website: www.wto.org; U.S. Trade Representative press release of March 20, 2009, is available on website: www.ustr.gov.]