2013 International Law Update, Volume 19, Number 2 (April - May - June)

2013 International Law Update, Volume 19, Number 2 (April - May - June)

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

ALIEN TORT STATUTE

Reviewing dismissal of Complaint based on Alien Tort Statute (ATS), U.S. Supreme Court holds that the presumption against extraterritoriality applies to such claims, and nothing in the ATS rebuts that presumption

In the following case, the U.S. Supreme Court reviews whether and under what circumstances courts may recognize a cause of action under the Alien Tort Statute, for violations of the law of nations that occurred within the territory of another country.

Various Dutch, British, and Nigerian corporations, through the subsidiary Shell Petroleum Development Company of Nigeria, Ltd. (SPDC), had been engaged in oil exploration and production in the Ogoni region of Nigeria since 1958. In response, residents of the region protested and were brutally repressed. The Petitioners in this case received political asylum in the U.S. and, in 2004, filed a putative class action complaint under the Alien Tort Statute, 28 U.S.C. § 1350 (ATS). The ATS provides that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. §1350.

The complaint alleged SPDC had aided and abetted the Nigerian government in suppressing the resistance by committing violations of the law of nations, including extrajudicial killing; crimes against humanity; torture or cruel, inhuman, and degrading treatment; arbitrary arrest and detention; violation of the rights to life, liberty, security, and association; forced exile; and property destruction.

The U.S. District Court for the Southern District of New York dismissed some of the claims against the corporate defendants, and certified the entire order for interlocutory appeal. The parties cross‑appealed. The U.S. Court of Appeals for the Second Circuit dismissed the entire complaint for lack of subject matter jurisdiction, because the law of nations does not recognize corporate liability. See 2011 International Law Update 39.

The issue before the Second Circuit was whether the ATS provides jurisdiction against corporations under customary international law. Quoting its own Filartiga v. Pena‑Irala, 630 F.2d 876, 890 (2d Cir. 1980), the Second Circuit noted that the statute provides jurisdiction over “(1) tort actions, (2) brought by aliens (only), (3) for violations of the law of nations (also called ‘customary international law’ FN3) including, as a general matter, war crimes and crimes against humanity—crimes in which the perpetrator can be called ‘hostis humani generis, an enemy of all mankind.’” [621 F.3d 149]. Although precedent has held that the ATS holds sway over natural persons and even over individual members of a corporation, it was a case of first impression whether the statute can subject a juridical person such as a corporation to its jurisdiction.

The Second Circuit took a two‑step approach in reaching its decision, considering, first, whether international or domestic law governs the case and, second, whether corporations are subject to liability for violations of customary international law. The Second Circuit concluded:

“[I]mposing liability on corporations for violations of customary international law has not attained a discernible, much less universal, acceptance among nations of the world in their relations inter se. Because corporate liability is not recognized as a ‘specific, universal, and obligatory’ norm, see [Sosa v. Alvarez‑Machain, 542 U.S. 692, 732], 124 S.Ct. 2739 (internal quotation marks omitted), it is not a rule of customary international law that we may apply under the ATS.” [621 F.3d 145]

The U.S. Supreme Court granted certiorari and now holds that the presumption against extraterritoriality applies to claims under the ATS. Nothing in the ATS rebuts that presumption.

The Court first notes that there is general presumption against extraterritoriality.

“The question here is not whether petitioners have stated a proper claim under the ATS, but whether a claim may reach conduct occurring in the territory of a foreign sovereign. Respondents contend that claims under the ATS do not, relying primarily on a canon of statutory interpretation known as the presumption against extraterritorial application. That canon provides that ‘[w]hen a statute gives no clear indication of an extraterritorial application, it has none,’ Morrison v. National Australia Bank Ltd., 561 U.S. ___, ___ (2010) (slip op., at 6), and reflects the ‘presumption that United States law governs domestically but does not rule the world,’ Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 454 (2007).”

“This presumption ‘serves to protect against unintended clashes between our laws and those of other nations which could result in international discord.’ EEOC v. Arabian American Oil Co., 499 U.S. 244, 248 (1991) (Aramco).” [Slip op. 4]

“We typically apply the presumption to discern whether an Act of Congress regulating conduct applies abroad. See, e.g., Aramco, supra, at 246 (‘These cases present the issue whether Title VII applies extraterritorially to regulate the employment practices of United States employers who employ United States citizens abroad’); Morrison, supra, at ___ (slip op., at 4) (noting that the question of extraterritorial application was a ‘merits question,’ not a question of jurisdiction). The ATS, on the other hand, is ‘strictly jurisdictional.’ Sosa, 542 U.S., at 713. It does not directly regulate conduct or afford relief. It instead allows federal courts to recognize certain causes of action based on sufficiently definite norms of international law. But we think the principles underlying the canon of interpretation similarly constrain courts considering causes of action that may be brought under the ATS.” [Slip op. 5]

The Court finds no indication that Congress intended exterritorial application for the ATS.

“ ¼[N]othing in the text of the statute suggests that Congress intended causes of action recognized under it to have extraterritorial reach. The ATS covers actions by aliens for violations of the law of nations, but that does not imply extraterritorial reach—such violations affecting aliens can occur either within or outside the United States. Nor does the fact that the text reaches ‘any civil action’ suggest application to torts committed abroad; it is well established that generic terms like ‘any’ or ‘every’ do not rebut the presumption against extraterritoriality. See, e.g., id., at ___ (slip op., at 13–14); Small v. United States, 544 U.S. 385, 388 (2005); Aramco, 499 U.S., at 248–250; Foley Bros., Inc. v. Filardo, 336 U.S. 281, 287 (1949).” [Slip op. 7]

“We therefore conclude that the presumption against extraterritoriality applies to claims under the ATS, and that nothing in the statute rebuts that presumption. ‘[T]here is no clear indication of extraterritoriality here,’ Morrison, 561 U.S., at ___ (slip op., at 16), and petitioners’ case seeking relief for violations of the law of nations occurring outside the United States is barred.”

“On these facts, all the relevant conduct took place outside the United States. And even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application. See Morrison, 561 U.S. ___ (slip op. at 17–24). Corporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices. If Congress were to determine otherwise, a statute more specific than the ATS would be required.”

“The judgment of the Court of Appeals is affirmed.”

The concurrence of Justice Breyer, joined by Justices Ginsburg, Sotomayor and Kagan, agrees with the Court’s conclusion but not with its reasoning.

“The Court sets forth four key propositions of law: First, the ‘presumption against extraterritoriality applies to claims under’ the Alien Tort Statute. Ante, at 13. Second, ‘nothing in the statute rebuts that presumption.’ Ibid. Third, there ‘is no clear indication of extraterritoria[l application] here,’ where ‘all the relevant conduct took place outside the United States’ and ‘where the claims’ do not ‘touch and concern the territory of the United States . . . with sufficient force to displace the presumption.’ Ante, at 13–14 (internal quotation marks omitted). Fourth, that is in part because ‘[c]orporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.’ Ante, at 14.”

“Unlike the Court, I would not invoke the presumption against extraterritoriality. Rather, guided in part by principles and practices of foreign relations law, I would find jurisdiction under this statute where (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant’s conduct substantially interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind. See Sosa v. Alvarez‑Machain, 542 U.S. 692, 732 (2004) (‘‘[F]or purposes of civil liability, the torturer has become—like the pirate and slave trader before him—hostis humani generis, an enemy of all mankind.’’ (quoting Filartiga v. Pena‑Irala, 630 F. 2d 876, 890 (CA2 1980) (alteration in original))). See also 1 Restatement (Third) of Foreign Relations Law of the United States §§ 402, 403, 404 (1986). In this case, however, the parties and relevant conduct lack sufficient ties to the United States for the ATS to provide jurisdiction.” [Concurrence, Slip op. 1‑2]

Citation: Kiobel v. Royal Dutch Petroleum Co., 569 U.S. ____ , 133 S.Ct. 1659 (2013); case below: Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010).

COPYRIGHT

U.S. Supreme Court holds that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad; reverses Second Circuit to the contrary and resolves split in the Circuits on this issue

John Wiley & Sons (Plaintiff), a publisher of academic, scientific, and educational journals and books, sells its publications domestically and internationally. For sales in foreign countries, the Plaintiff uses its subsidiary John Wiley & Sons (Asia) Pte Ltd. The written content is generally similar in the books intended for domestic markets and in the books intended for international markets, though the design and packaging may differ. The Defendant Supap Kirtsaeng moved to the United States from Thailand in 1997 to attend Cornell University. He later moved to California to pursue a doctoral degree.

Between 2007 and 2008, Kirtsaeng’s friends and family shipped the Defendant foreign editions of textbooks printed abroad by Wiley Asia. Kirtsaeng then sold these books on eBay.com. He would repay his family and friends for the cost of acquiring and shipping the books and keep the profits for himself as he subsidized his education. On September 8, 2008, Wiley filed suit against Kirtsaeng in the United States District Court of the Southern District of New York claiming copyright infringement. Kirtsaeng attempted to assert a defense of the first sale doctrine, but the district court prohibited him from doing so and rejected the applicability of the doctrine to foreign editions of textbooks not manufactured pursuant to U.S. Copyright Act. Kirtsaeng was found liable for copyright infringement and then appealed, claiming that the district court erred in holding that the first sale doctrine was not an available defense.

The United States Court of Appeals for the Second Circuit affirmed the district court’s holding that the first sale doctrine does not apply to foreign books or copies manufactured outside of the United States. This was a matter of first impression for this Court. The Court interpreted the first sale doctrine, which states that the owner of a lawfully acquired copy of a work may sell or otherwise dispose of the copy without the authority of the copyright owner. However, § 602(a) of the Copyright Act gives copyright holders broad control over the circumstance in which their copyrighted work may be imported into the United States. The Court cited a recent Supreme Court opinion in Omega S.A. v. Costco Wholesale Corp., 541 F.3d 982 (9th Cir. 2008), that states that the first sale doctrine does not apply to items manufactured outside of the United States unless they were previously imported and sold in the United States with the copyright holder’s permission.

 “Applying these principles to the facts of this case, we conclude that the District Court correctly decided that Kirtsaeng could not avail himself of the first sale doctrine codified by § 109(a) since all the books in question were manufactured outside of the United States. In sum, we hold that the phrase ‘lawfully made under this Title’ in § 109(a) refers specifically and exclusively to copies that are made in territories in which the Copyright Act is law, and not to foreign‑manufactured works. . . . We freely acknowledge that this is a particularly difficult question of statutory construction in light of the ambiguous language of § 109(a), but our holding is supported by the structure of Title 17 as well as the Supreme Court’s opinion in [Quality Kings Distributors, Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 (1998)].” 654 F.3d 222.           

The U.S. Supreme Court reverses. Noting all the difficulties for international trade that would result from such interpretation, as well as the split among the Circuits, the U.S. Supreme Court concludes that the “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad.

“¼[W]e ask whether the ‘first sale’ doctrine applies to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad. Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner? Can, for example, someone who purchases, say at a used bookstore, a book printed abroad subsequently resell it without the copyright owner’s permission?”

“In our view, the answers to these questions are, yes. We hold that the ‘first sale’ doctrine applies to copies of a copyrighted work lawfully made abroad.” [Slip op. 7]

“In our view, §109(a)’s language, its context, and the common‑law history of the ‘first sale’ doctrine, taken together, favor a non‑geographical interpretation. We also doubt that Congress would have intended to create the practical copyright‑related harms with which a geographical interpretation would threaten ordinary scholarly, artistic, commercial, and consumer activities. See Part II‑D, infra. We consequently conclude that Kirtsaeng’s nongeographical reading is the better reading of the Act.”

“The language of §109(a) read literally favors Kirtsaeng’s nongeographical interpretation, namely, that ‘lawfully made under this title’ means made ‘in accordance with’ or ‘in compliance with’ the Copyright Act. The language of §109(a) says nothing about geography. The word ‘under’ can mean ‘[i]n accordance with.’ 18 Oxford English Dictionary 950 (2d ed. 1989). See also Black’s Law Dictionary 1525 (6th ed. 1990) (‘according to’). And a nongeographical interpretation provides each word of the five‑word phrase with a distinct purpose. The first two words of the phrase, ‘lawfully made,’ suggest an effort to distinguish those copies that were made lawfully from those that were not, and the last three words, ‘under this title,’ set forth the standard of ‘lawful[ness].’ Thus, the nongeographical reading is simple, it promotes a traditional copyright objective (combatting piracy), and it makes word‑by‑word linguistic sense.”

“The geographical interpretation, however, bristles with linguistic difficulties. It gives the word ‘lawfully’ little, if any, linguistic work to do. (How could a book be unlawfully ‘made under this title’?) It imports geography into a statutory provision that says nothing explicitly about it. And it is far more complex than may at first appear.” [Slip op. 12‑13]

The Supreme Court points to the difficulties for libraries, used‑book dealers, technology companies, consumer‑goods retailers and museums whose activities would otherwise be hampered. How would U.S. libraries obtain permission to circulate their estimated 200 million foreign‑printed books? How could cars, microwaves, and mobile phones that contain copyrightable software be imported to the U.S.? The practical problems in obtaining copyright permission for these innumerable transactions are overwhelming.

The U.S. Supreme Court therefore reverses the Second Circuit and remands for further proceedings.

The Dissenters find that such interpretation contravenes Congress’ intent to protect copyright.

“’In the interpretation of statutes, the function of the courts is easily stated. It is to construe the language so as to give effect to the intent of Congress.’ United States v. American Trucking Assns., Inc., 310 U.S. 534, 542 (1940). Instead of adhering to the Legislature’s design, the Court today adopts an interpretation of the Copyright Act at odds with Congress’ aim to protect copyright owners against the unauthorized importation of low‑priced, foreign‑made copies of their copyrighted works. The Court’s bold departure from Congress’ design is all the more stunning, for it places the United States at the vanguard of the movement for ‘international exhaustion’ of copyrights—a movement the United States has steadfastly resisted on the world stage.” [Slip op. 42]

“Rather than adopting the very international‑exhaustion rule the United States has consistently resisted in international‑trade negotiations, I would adhere to the national‑exhaustion framework set by the Copyright Act’s text and history. Under that regime, codified in §602(a)(1), Kirtsaeng’s unauthorized importation of the foreign‑made textbooks involved in this case infringed Wiley’s copyrights. I would therefore affirm the Second Circuit’s judgment.” [Slip op. 74]

Citation: Kirtsaeng, DBA Bluechristine99 v. John Wiley & Sons, Inc., No. 11‑697 (U.S. March 19, 2013), reversing John Wiley & Sons Inc. v. Kirtsaeng, 654 F.3d 210 (2d Cir. 2011).

HUMAN RIGHTS

In reviewing consolidated cases and applying balancing tests, European Court of Human Rights finds in one case that the United Kingdom failed to adequately protect the complainant’s right to manifest her religion at the workplace; the Court finds no violation of the European Convention on Human Rights in the other consolidated cases

In the following judgment, the European Court of Human Rights partly sided with complainants who sought to express their religious beliefs at the workplace. Article 9 of the European Convention on Human Rights 1950 includes the freedom to manifest one’s religious beliefs in the workplace. However, where a person’s religious observance adversely affects the rights of others, the contracting states can impose restrictions.

The complainants E, C, L and M had expressed their religious beliefs in various forms at the workplace and suffered adverse action. E worked for British Airways and was not allowed to wear a visible Christian cross at the workplace. The company policy required religious items to be covered by the uniform while at work. C was a nurse who was not allowed to wear a necklace with a Christian cross while handling patients. The hospital policy generally prohibited the use of necklaces to reduce the risk of injury while handling patients. L was a registrar at a local civil registry who refused to be the registrar for civil partnerships. The Borough that employed her had a “Dignity for All” equality and diversity policy which prohibited any kind of discrimination. M was a counselor who refused to work with same‑sex couples. His employer’s Code of Practice and Principles of Good Practice to ensure that no person receives less favorable treatment. The Court consolidated the four cases.

The Court first reviews applicable United Kingdom law, as well as law in the Council of Europe Member States, as well as in the United States and Canada.

“[Council of Europe Member States] 47._An analysis of the law and practice relating to the wearing of religious symbols at work across twenty‑six Council of Europe Contracting States demonstrates that in the majority of States the wearing of religious clothing and/or religious symbols in the workplace is unregulated. In three States, namely Ukraine, Turkey and some cantons of Switzerland, the wearing of religious clothing and/or religious symbols for civil servants and other public sector employees is prohibited, but in principle it is allowed to employees of private companies. In five States—Belgium, Denmark, France, Germany and the Netherlands—the domestic courts have expressly admitted, at least in principle, an employer’s right to impose certain limitations upon the wearing of religious symbols by employees; however, there are neither laws nor regulations in any of these countries expressly allowing an employer to do so. In France and Germany, there is a strict ban on the wearing of religious symbols by civil servants and State employees, while in the three other countries the attitude is more flexible. A blanket ban on wearing religious clothing and/or symbols at work by private employees is not allowed anywhere. On the contrary, in France it is expressly prohibited by law. Under French legislation, in order to be declared lawful any such restriction must pursue a legitimate aim, relating to sanitary norms, the protection of health and morals, the credibility of the company’s image in the eyes of the customer, as well as pass a proportionality test.” [...]

“[United States of America] 48. For civil servants and Government employees, the wearing of religious symbols is protected under both the United States Constitution (the Establishment Clause and the Free Exercise Clause) and the Civil Rights Act 1964. When a constitutional claim is made by a public employee, the courts apply the standard of intermediate scrutiny, under which the Government can impose restrictions on the wearing of religious symbols if the action is “substantially related” to promoting an “important” Government interest (see Tenafly Eruv Association v. Borough of Tenafly, 309 F.3d 144, 157 (3rd Cir. 2002)). When a statutory claim is made, the employer must have either offered “reasonable accommodation” for the religious practice or prove that allowing those religious practices would have imposed “undue hardship” on the employer (see Ansonia Board of Education v. Philbrook, 479 U.S. 60 (1986); United States v. Board of Education for School District of Philadelphia, 911 F.2d 882, 886 (3rd Cir. 1990); Webb v. City of Philadelphia, 562 F.3d 256 (3rd Cir. 2009)). For private employees there are no constitutional limitations on the ability of employers to restrict the wearing of religious clothing and/or symbols. However, the restrictions from Title VII of the Civil Rights Act continue to apply so long as the employer has over 15 employees.” [Page 17‑18]

The Court then cites the relevant language of the Convention:

“51._The first, second and fourth applicants complained that the sanctions they suffered at work breached their rights under Article 9 of the Convention, taken alone or in conjunction with Article 14. The third applicant complained of a breach of Articles 14 and 9 taken together.”

“Article 9 provides:”

“1. Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief and freedom, either alone or in community with others and in public or private, to manifest his religion or belief, in worship, teaching, practice and observance.”

“2. Freedom to manifest one’s religion or beliefs shall be subject only to such limitations as are prescribed by law and are necessary in a democratic society in the interests of public safety, for the protection of public order, health or morals, or for the protection of the rights and freedoms of others.”

“Article 14 provides:”

“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.” [Page 19]

The Court then contemplates how these Articles apply to the cases presented by E, C, L and M.

“1. General principles under Article 9 of the Convention”

“79._The Court recalls that, as enshrined in Article 9, freedom of thought, conscience and religion is one of the foundations of a ‘democratic society’ within the meaning of the Convention. In its religious dimension it is one of the most vital elements that go to make up the identity of believers and their conception of life, but it is also a precious asset for atheists, agnostics, sceptics and the unconcerned. The pluralism indissociable from a democratic society, which has been dearly won over the centuries, depends on it (see Kokkinakis v. Greece, 25 May 1993, § 31, Series A no. 260A).”

“80._Religious freedom is primarily a matter of individual thought and conscience. This aspect of the right set out in the first paragraph of Article_9, to hold any religious belief and to change religion or belief, is absolute and unqualified. However, as further set out in Article 9 § 1, freedom of religion also encompasses the freedom to manifest one’s belief, alone and in private but also to practice in community with others and in public. The manifestation of religious belief may take the form of worship, teaching, practice and observance. Bearing witness in words and deeds is bound up with the existence of religious convictions (see Kokkinakis, cited above, § 31 and also Leyla ahin v. Turkey [GC], no. 44774/98, § 105, ECHR 2005XI). Since the manifestation by one person of his or her religious belief may have an impact on others, the drafters of the Convention qualified this aspect of freedom of religion in the manner set out in Article 9 § 2. This second paragraph provides that any limitation placed on a person’s freedom to manifest religion or belief must be prescribed by law and necessary in a democratic society in pursuit of one or more of the legitimate aims set out therein.”

“81. The right to freedom of thought, conscience and religion denotes views that attain a certain level of cogency, seriousness, cohesion and importance (see Bayatyan v. Armenia [GC], no. 23459/03, § 110, ECHR 2011; Leela Förderkreis e.V. and Others v. Germany, no. 58911/00, § 80, 6_November 2008; Jakóbski v. Poland, no. 18429/06, § 44, 7 December 2010). Provided this is satisfied, the State’s duty of neutrality and impartiality is incompatible with any power on the State’s part to assess the legitimacy of religious beliefs or the ways in which those beliefs are expressed (see Manoussakis and Others v. Greece, judgment of 26_September 1996, Reports 1996‑IV, p. 1365, § 47; Hasan and Chaush v._Bulgaria [GC], no. 30985/96, § 78, ECHR 2000XI; Refah Partisi (the_Welfare Party) and Others v. Turkey [GC], nos. 41340/98, 41342/98, 41343/98 and 41344/98, § 1, ECHR 2003‑II).”

“82. Even where the belief in question attains the required level of cogency and importance, it cannot be said that every act which is in some way inspired, motivated or influenced by it constitutes a ‘manifestation’ of the belief. Thus, for example, acts or omissions which do not directly express the belief concerned or which are only remotely connected to a precept of faith fall outside the protection of Article 9 § 1 (see Skugar and Others v. Russia (dec.), no. 40010/04, 3 December 2009 and, for example, Arrowsmith v. the United Kingdom, Commission’s report of 12 October 1978, Decisions and Reports 19, p. 5; C. v. the United Kingdom, Commission decision of 15 December 1983, DR 37, p. 142; Zaoui v._Switzerland (dec.), no. 41615/98, 18 January 2001). In order to count as a “manifestation” within the meaning of Article 9, the act in question must be intimately linked to the religion or belief. An example would be an act of worship or devotion which forms part of the practice of a religion or belief in a generally recognised form. However, the manifestation of religion or belief is not limited to such acts; the existence of a sufficiently close and direct nexus between the act and the underlying belief must be determined on the facts of each case. In particular, there is no requirement on the applicant to establish that he or she acted in fulfilment of a duty mandated by the religion in question (see Cha’are Shalom Ve Tsedek v. France [GC], no. 27417/95, §§ 73‑74, ECHR 2000VII; Leyla ahin, cited above, §§ 78 and 105; Bayatyan, cited above, § 111; Skugar, cited above; Pichon and Sajous v. France (dec.), no. 49853/99, Reports of Judgments and Decisions 2001‑X).”

“83. It is true, as the Government point out and as Lord Bingham observed in R (Begum) v. Governors of Denbigh High School case (see paragraph 46 above), that there is case‑law of the Court and Commission which indicates that, if a person is able to take steps to circumvent a limitation placed on his or her freedom to manifest religion or belief, there is no interference with the right under Article 9 § 1 and the limitation does not therefore require to be justified under Article 9 § 2. For example, in the above‑cited Cha’are Shalom Ve Tsedek case, the Court held that “there would be interference with the freedom to manifest one’s religion only if the illegality of performing ritual slaughter made it impossible for ultra‑orthodox Jews to eat meat from animals slaughtered in accordance with the religious prescriptions they considered applicable”. However, this conclusion can be explained by the Court’s finding that the religious practice and observance at issue in that case was the consumption of meat only from animals that had been ritually slaughtered and certified to comply with religious dietary laws, rather than any personal involvement in the ritual slaughter and certification process itself (see §§ 80 and 82). More relevantly, in cases involving restrictions placed by employers on an employee’s ability to observe religious practice, the Commission held in several decisions that the possibility of resigning from the job and changing employment meant that there was no interference with the employee’s religious freedom (see, for example, Konttinen v. Finland, Commission’s decision of 3 December 1996, Decisions and Reports 87‑A, p. 68; Stedman_v. the United Kingdom, Commission’s decision of 9 April 1997; compare Kosteski v. ‘the former Yugoslav Republic of Macedonia’, no. 55170/00, § 39, 13 April 2006). However, the Court has not applied a similar approach in respect of employment sanctions imposed on individuals as a result of the exercise by them of other rights protected by the Convention, for example the right to respect for private life under Article 8; the right to freedom of expression under Article 10; or the negative right, not to join a trade union, under Article 11 (see, for example, Smith and Grady v. the United Kingdom, nos. 33985/96 and 33986/96, § 71, ECHR 1999VI; Vogt v. Germany, 26 September 1995, § 44, Series A no. 323; Young, James and Webster v. the United Kingdom, 13 August 1981, §§_54‑55, Series A no. 44). Given the importance in a democratic society of freedom of religion, the Court considers that, where an individual complains of a restriction on freedom of religion in the workplace, rather than holding that the possibility of changing job would negate any interference with the right, the better approach would be to weigh that possibility in the overall balance when considering whether or not the restriction was proportionate.”

“84. According to its settled case‑law, the Court leaves to the States party to the Convention a certain margin of appreciation in deciding whether and to what extent an interference is necessary. This margin of appreciation goes hand in hand with European supervision embracing both the law and the decisions applying it. The Court’s task is to determine whether the measures taken at national level were justified in principle and proportionate (see Leyla ahin, cited above, § 110; Bayatyan, cited above, §§ 121‑122; Manoussakis, cited above, § 44). Where, as for the first and fourth applicants, the acts complained of were carried out by private companies and were not therefore directly attributable to the respondent State, the Court must consider the issues in terms of the positive obligation on the State authorities to secure the rights under Article 9 to those within their jurisdiction (see, mutatis mutandis, Palomo Sánchez and Others v. Spain [GC], nos. 28955/06, 28957/06, 28959/06 and 28964/06, §§ 58‑61, ECHR 2011; see also Otto‑Preminger‑Institut v. Austria judgment of 25 November 1994, Series A no. 295, § 47). Whilst the boundary between the State’s positive and negative obligations under the Convention does not lend itself to precise definition, the applicable principles are, nonetheless, similar. In both contexts regard must be had in particular to the fair balance that has to be struck between the competing interests of the individual and of the community as a whole, subject in any event to the margin of appreciation enjoyed by the State (see Palomo Sánchez and Others, cited above, § 62).”

“2. General principles under Article 14 of the Convention”

“85. The Court recalls that Article 14 of the Convention has no independent existence, since it has effect solely in relation to the rights and freedoms safeguarded by the other substantive provisions of the Convention and its Protocols. However, the application of Article 14 does not presuppose a breach of one or more of such provisions and to this extent it is autonomous. For Article 14 to become applicable it suffices that the facts of a case fall within the ambit of another substantive provision of the Convention or its Protocols (see, for example, Thlimmenos v. Greece [GC], no. 34369/97, § 40, ECHR 2000IV).”

“86. The Court has established in its case‑law that only differences in treatment based on an identifiable characteristic, or ‘status’, are capable of amounting to discrimination within the meaning of Article 14 (Carson and Others v. the United Kingdom [GC], no. 42184/05, § 61, ECHR 2010). ‘Religion’ is specifically mentioned in the text of Article 14 as a prohibited ground of discrimination.”

“87. Generally, in order for an issue to arise under Article 14 there must be a difference in the treatment of persons in analogous, or relevantly similar, situations (Burden v. the United Kingdom [GC], no. 13378/05, § 60, ECHR 2008). However, this is not the only facet of the prohibition of discrimination in Article 14. The right not to be discriminated against in the enjoyment of the rights guaranteed under the Convention is also violated when States, without an objective and reasonable justification, fail to treat differently persons whose situations are significantly different (Thlimmenos, cited above, § 44; see also D.H. and Others v. the Czech Republic [GC], no._57325/00, § 175, ECHR 2007; Runkee and White v. the United Kingdom, nos. 42949/98 and 53134/99, § 35, 10 May 2007).”

“88. Such a difference of treatment between persons in relevantly similar positions ‑ or a failure to treat differently persons in relevantly different situations ‑ is discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. The Contracting State enjoys a margin of appreciation in assessing whether and to what extent differences in otherwise similar situations justify a different treatment (Burden, cited above, § 60). The scope of this margin will vary according to the circumstances, the subject‑matter and the background (Carson and Others, cited above, § 61).” [Page 29‑33]

The Court concludes as follows:

As for complainant E who worked for British Airways, the necessary fair balance had not been struck. While the employer wishes to project a certain corporate image, small and or discreet religious items will not adversely affect the brand or image. Thus, there was a violation of Article 9:

“93. When considering the proportionality of the steps taken by British Airways to enforce its uniform code, the national judges at each level agreed that the aim of the code was legitimate, namely to communicate a certain image of the company and to promote recognition of its brand and staff. The Employment Tribunal considered that the requirement to comply with the code was disproportionate, since it failed to distinguish an item worn as a religious symbol from a piece of jewellery worn purely for decorative reasons. This finding was reversed on appeal to the Court of Appeal, which found that British Airways had acted proportionately. In reaching this conclusion, the Court of Appeal referred to the facts of the case as established by the Employment Tribunal and, in particular, that the dress code had been in force for some years and had caused no known problem to the applicant or any other member of staff; that Ms Eweida lodged a formal grievance complaint but then decided to arrive at work displaying her cross, without waiting for the results of the grievance procedure; that the issue was conscientiously addressed by British Airways once the complaint had been lodged, involving a consultation process and resulting in a relaxation of the dress code to permit the wearing of visible religious symbols; and that Ms Eweida was offered an administrative post on identical pay during this process and was in February 2007 reinstated in her old job.

94. It is clear, in the view of the Court, that these factors combined to mitigate the extent of the interference suffered by the applicant and must be taken into account. Moreover, in weighing the proportionality of the measures taken by a private company in respect of its employee, the national authorities, in particular the courts, operate within a margin of appreciation. Nonetheless, the Court has reached the conclusion in the present case that a fair balance was not struck. On one side of the scales was Ms Eweida’s desire to manifest her religious belief. As previously noted, this is a fundamental right: because a healthy democratic society needs to tolerate and sustain pluralism and diversity; but also because of the value to an individual who has made religion a central tenet of his or her life to be able to communicate that belief to others. On the other side of the scales was the employer’s wish to project a certain corporate image. The Court considers that, while this aim was undoubtedly legitimate, the domestic courts accorded it too much weight. Ms Eweida’s cross was discreet and cannot have detracted from her professional appearance. There was no evidence that the wearing of other, previously authorised, items of religious clothing, such as turbans and hijabs, by other employees, had any negative impact on British Airways’ brand or image. Moreover, the fact that the company was able to amend the uniform code to allow for the visible wearing of religious symbolic jewellery demonstrates that the earlier prohibition was not of crucial importance.

95. The Court therefore concludes that, in these circumstances where there is no evidence of any real encroachment on the interests of others, the domestic authorities failed sufficiently to protect the first applicant’s right to manifest her religion, in breach of the positive obligation under Article 9. In the light of this conclusion, it does not consider it necessary to examine separately the applicant’s complaint under Article 14 taken in conjunction with Article 9.” [Page 34‑35]

As for complainant C who worked as a nurse, the policy of prohibiting jewelry which might injure patients is reasonable. The interference with her freedom to manifest religion was necessary. There was no violation of Articles 9 or 14:

“98. The second applicant’s employer was a public authority, and the Court must determine whether the interference was necessary in a democratic society in pursuit of one of the aims set out in Article 9 § 2. In this case, there does not appear to be any dispute that the reason for the restriction on jewellery, including religious symbols, was to protect the health and safety of nurses and patients. The evidence before the Employment Tribunal was that the applicant’s managers considered there was a risk that a disturbed patient might seize and pull the chain, thereby injuring herself or the applicant, or that the cross might swing forward and could, for example, come into contact with an open wound. There was also evidence that another Christian nurse had been requested to remove a cross and chain; two Sikh nurses had been told they could not wear a bangle or kirpan; and that flowing hijabs were prohibited. The applicant was offered the possibility of wearing a cross in the form of a brooch attached to her uniform, or tucked under a high‑necked top worn under her tunic, but she did not consider that this would be sufficient to comply with her religious conviction.

99. The Court considers that, as in Ms Eweida’s case, the importance for the second applicant of being permitted to manifest her religion by wearing her cross visibly must weigh heavily in the balance. However, the reason for asking her to remove the cross, namely the protection of health and safety on a hospital ward, was inherently of a greater magnitude than that which applied in respect of Ms Eweida. Moreover, this is a field where the domestic authorities must be allowed a wide margin of appreciation. The hospital managers were better placed to make decisions about clinical safety than a court, particularly an international court which has heard no direct evidence.

100. It follows that the Court is unable to conclude that the measures of which Ms Chaplin complains were disproportionate. It follows that the interference with her freedom to manifest her religion was necessary in a democratic society and that there was no violation of Article 9 in respect of the second applicant.

101. Moreover, it considers that the factors to be weighed in the balance when assessing the proportionality of the measure under Article 14 taken in conjunction with Article 9 would be similar, and that there is no basis on which it can find a violation of Article 14 either in this case.” [Page 36‑37]

As for complainant L who was a registrar, the local authority’s policy sought to protect the rights of others, which are also protected under the Convention. National authorities have a wide margin of discretion in striking a balance between such competing Convention rights. There was no violation of Article 14 in conjunction with Article 9:

“104. The Court considers that the relevant comparator in this case is a registrar with no religious objection to same‑sex unions. It agrees with the applicant’s contention that the local authority’s requirement that all registrars of births, marriages and deaths be designated also as civil partnership registrars had a particularly detrimental impact on her because of her religious beliefs. In order to determine whether the local authority’s decision not to make an exception for the applicant and others in her situation amounted to indirect discrimination in breach of Article 14, the Court must consider whether the policy pursued a legitimate aim and was proportionate.

105. The Court of Appeal held in this case that the aim pursued by the local authority was to provide a service which was not merely effective in terms of practicality and efficiency, but also one which complied with the overarching policy of being “an employer and a public authority wholly committed to the promotion of equal opportunities and to requiring all its employees to act in a way which does not discriminate against others”. The Court recalls that in its case‑law under Article 14 it has held that differences in treatment based on sexual orientation require particularly serious reasons by way of justification (see, for example, Karner v. Austria, no. 40016/98, §_37, ECHR 2003IX; Smith and Grady, cited above, § 90; Schalk and Kopf v. Austria, no. 30141/04, § 97, ECHR 2010). It has also held that same‑sex couples are in a relevantly similar situation to different‑sex couples as regards their need for legal recognition and protection of their relationship, although since practice in this regard is still evolving across Europe, the Contracting States enjoy a wide margin of appreciation as to the way in which this is achieved within the domestic legal order (Schalk and Kopf, cited above, §§ 99‑108). Against this background, it is evident that the aim pursued by the local authority was legitimate.

106. It remains to be determined whether the means used to pursue this aim were proportionate. The Court takes into account that the consequences for the applicant were serious: given the strength of her religious conviction, she considered that she had no choice but to face disciplinary action rather than be designated a civil partnership registrar and, ultimately, she lost her job. Furthermore, it cannot be said that, when she entered into her contract of employment, the applicant specifically waived her right to manifest her religious belief by objecting to participating in the creation of civil partnerships, since this requirement was introduced by her employer at a later date. On the other hand, however, the local authority’s policy aimed to secure the rights of others which are also protected under the Convention. The Court generally allows the national authorities a wide margin of appreciation when it comes to striking a balance between competing Convention rights (see, for example, Evans v. the United Kingdom [GC], no. 6339/05, § 77, ECHR 2007I). In all the circumstances, the Court does not consider that the national authorities, that is the local authority employer which brought the disciplinary proceedings and also the domestic courts which rejected the applicant’s discrimination claim, exceeded the margin of appreciation available to them. It cannot, therefore, be said that there has been a violation of Article 14 taken in conjunction with Article 9 in respect of the third applicant.” [Page 37‑38]

As for complainant M who refused to counsel same‑sex couples, the employer’s action was intended to ensure its policy of non‑discriminatory service. Thus, a balance had to be struck between M’s rights to manifest his religious beliefs and the employer’s interest in securing the rights of others. The adverse action against M was within the margin of discretion. There was no violation of Articles 9 or 14:

“109. It remains to be determined whether the State complied with this positive obligation and in particular whether a fair balance was struck between the competing interests at stake (see paragraph 84 above). In making this assessment, the Court takes into account that the loss of his job was a severe sanction with grave consequences for the applicant. On the other hand, the applicant voluntarily enrolled on Relate’s post‑graduate training programme in psycho‑sexual counselling, knowing that Relate operated an Equal Opportunities Policy and that filtering of clients on the ground of sexual orientation would not be possible (see paragraphs_3234 above). While the Court does not consider that an individual’s decision to enter into a contract of employment and to undertake responsibilities which he knows will have an impact on his freedom to manifest his religious belief is determinative of the question whether or not there been an interference with Article 9 rights, this is a matter to be weighed in the balance when assessing whether a fair balance was struck (see paragraph 83 above). However, for the Court the most important factor to be taken into account is that the employer’s action was intended to secure the implementation of its policy of providing a service without discrimination. The State authorities therefore benefitted from a wide margin of appreciation in deciding where to strike the balance between Mr McFarlane’s right to manifest his religious belief and the employer’s interest in securing the rights of others. In all the circumstances, the Court does not consider that this margin of appreciation was exceeded in the present case.

110. In conclusion, the Court does not consider that the refusal by the domestic courts to uphold Mr McFarlane’s complaints gave rise to a violation of Article 9, taken alone or in conjunction with Article 14.” [Page 38‑39]

The partial dissent disagrees with the finding of an Article 9 violation for complainant E. The employer’s workplace policy was reasonable and justified, and the policy was a proportionate means of achieving a legitimate end.

Citation: European Court of Human Rights, Case of Eweida and Others v. The United Kingdom (48420/10) (15 January 2013, final as of 27/05/2013), [2013] I.R.L.R. 231; (2013) 57 E.H.R.R. 8; [2013] Eq. L.R. 264; (2013) 163 N.L.J. 70.

SOVEREIGN IMMUNITY

Reviewing the attachment of museum objects located in the U.S. and allegedly owned by Iran, First Circuit finds that such objects are immune from attachment under the Foreign Sovereign Immunities Act (FSIA)

The Plaintiffs‑Appellants in the following case had been injured in a 1997 terrorist attack by Hamas in Jerusalem. In 2003, they obtained a default judgment against Iran, which had allegedly provided material support to Hamas, and registered it in the District of Massachusetts in 2005. To collect on that judgment, the Plaintiffs‑Appellants moved to attach, by means of a trustee process action in Massachusetts, certain Iranian exhibits in the Museum of Fine Arts, Boston (MFA) and Harvard University (collectively “Museums”). The items to be attached were “antiquities ¼ that are the property of the Islamic Republic of Iran” held by the Museums, which totaled approximately 2,000 items.

The Museums moved to dissolve the attachments because Iran did not own the items. Even if Iran did own them, the items would be immune under the FSIA. FSIA Section 1609 provides that “the property in the United States of a foreign state shall be immune from attachment arrest and execution except as provided in sections 1610 and 1611.¼”

The District Court dissolved the attachments because they were immune based on the Foreign Sovereign Immunities Act (FSIA), Sections 1602‑1611. This appeal followed.

The U.S. Court of Appeals for the First Circuit affirms the dissolution of the trustee attachments, but bases its opinion on narrower grounds than the District Court.

The Court first addresses the sovereign immunity issue.

“The FSIA makes ‘the property in the United States of a foreign state’ immune from attachment and execution, subject to certain exceptions, 28 U.S.C. § 1609, one of which permits the attachment of property ‘used for a commercial activity in the United States,’ assuming the underlying judgment ‘relates to a claim for which the foreign state is not immune under section 1605A or section 1605(a)(7) (as such section was in effect on January 27, 2008),’ id. § 1610(a)(7). The plaintiffs argued before the district court that the antiquities fell within the scope of that exception. ¼ They claimed that the statute did not require Iran specifically to use the antiquities for commercial purposes in the United States, but that any party (including the Museums) could do so in order for section 1610(a)(7) to be implicated. The district court rejected that argument, holding that ‘the plain language of the statute, its legislative history, and generally accepted principles of international law establish that the ‘commercial use’ exception of § 1610 applies only where it is the foreign sovereign who engages in the commercial activity.’” [Slip op. 9‑10]

Next, the Court addresses the Terrorism Risk Insurance Act of 2002 (TRIA), Pub. L. No. 107‑297, § 201(a), 116 Stat. 2322, 2337 (2002) (codified at 28 U.S.C. § 1610 note), which permits the attachment of certain “blocked assets of [a] terrorist party.”

“[U]nder certain circumstances, TRIA permits the attachment of property that might otherwise be immune under the FSIA. See Bennett v. Islamic Rep. of Iran, 618 F.3d 19, 21 (D.C. Cir. 2010). The relevant section of TRIA provides that ‘[n]otwithstanding any other provision of law . . . , a person [who] has obtained a judgment against a terrorist party on a claim based upon an act of terrorism’ may attach and execute on ‘the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party)’ in order to satisfy the judgment. TRIA § 201(a). TRIA thereby allows a person to circumvent the normal process for attaching assets that are blocked under a sanctions program, which entails obtaining a license from OFAC. See, e.g., 31 C.F.R. §§ 535.201, 535.310, 515.201, 515.310, 594.201, 594.312.”

“There exists some debate as to whether TRIA preempts state property law and whether the phrase ‘assets of that terrorist party’ in section 201(a) means that the terrorist party must actually own the assets. ¼ But even if we assume, simply for the sake of argument, that the antiquities at issue here qualify as ‘assets of’ Iran under section 201(a), they would also need to be ‘blocked’ in order to fall within TRIA’s scope. See Ministry of Def. & Support for the Armed Forces of the Islamic Rep. of Iran v. Elahi, 556 U.S. 366, 369 (2009) (‘[W]e initially decide whether Iran’s Cubic Judgment is a ‘blocked asset’ within the terms of [TRIA].’). That question of law, whether viewed as one of statutory interpretation or one of foreign sovereign immunity, is subject to de novo review.” [Slip op. 12‑13]

“TRIA defines the phrase ‘blocked asset’ as ‘any asset seized or frozen by the United States . . . under sections 202 and 203 of the International Emergency Economic Powers Act’ (IEEPA), Pub. L. No. 95‑223, §§ 202‑203, 91 Stat. 1625, 1626 (1977) (codified at 50 U.S.C. §§ 1701‑1702). TRIA § 201(d)(2)(A). We have described the IEEPA as codifying ‘Congress’s intent to confer broad and flexible power upon the President to impose and enforce economic sanctions against nations that the President deems a threat to national security interests.’ United States v. McKeeve, 131 F.3d 1, 10 (1st Cir. 1997). OFAC is responsible for administering sanctions imposed under the IEEPA.”

“In 1979, in response to the Iranian hostage crisis, President Carter issued an IEEPA‑based executive order (‘the 1979 order’), which OFAC later implemented though regulations, blocking all transactions involving ‘property subject to the jurisdiction of the United States or which is in the possession of or control of persons subject to the jurisdiction of the United States’ in which Iran had ‘any interest of any nature whatsoever,’ unless OFAC authorized the transaction. 31 C.F.R. § 535.201; see also Exec. Order No. 12,170, 44 Fed. Reg. 65,729 (Nov. 14, 1979).”

“OFAC’s 1979 blocking order remains in place, but its effect was significantly circumscribed by the 1981 Algiers Accords, pursuant to which the United States and Iran resolved the hostage crisis and the United States promised to ‘revoke all trade sanctions’ that had been directed against Iran since November 1979 and to arrange ‘for the transfer to Iran of all Iranian properties . . . located in the United States’ that were not addressed by other parts of the agreement. Declaration of the Government of the Democratic and Popular Republic of Algeria, U.S.‑Iran, Jan. 19, 1981, 20 I.L.M. 224, 227 ¼ As part of the Accords, President Carter issued Executive Order 12,281 (‘the 1981 order’), which directed ‘[a]ll persons subject to the jurisdiction of the United States in possession or control of properties, not including funds and securities, owned by Iran or its agencies, instrumentalities, or controlled entities’ to ‘transfer such properties, as directed after the effective date of this Order by the Government of Iran.’ 46 Fed. Reg. 7,923, 7,923 (Jan. 19, 1981). The Algiers Accords automatically unblocked most Iranian assets that existed in this country at the time. ¼”

“OFAC’s implementing regulation closely mirrors the language of the 1981 order. It requires ‘all persons subject to the jurisdiction of the United States in possession or control of properties, as defined in [31 C.F.R. § 535.333] . . . to transfer such properties held on January 18, 1981 as directed after that day by the Government of Iran.’ 31 C.F.R. § 535.215(a). Section 535.333, in turn, defines the universe of ‘properties’ unblocked by the 1981 order: ‘all uncontested and non‑contingent liabilities and property interests of the Government of Iran, its agencies, instrumentalities, or controlled entities, including debts.’ Id. § 535.333(a). A property interest cannot be ‘contested’ under section 535.333 unless ‘the holder thereof reasonably believes that Iran does not have title or has only partial title to the asset.’ Id. § 535.333(c). ‘After October 23, 2001, such a belief may be considered reasonable only if it is based upon a bona fide opinion, in writing, of an attorney licensed to practice within the United States stating that Iran does not have title or has only partial title to the asset.’ Id.”

“Thus, to further narrow the issue, we must determine whether the antiquities in the Museums’ possession are ‘contested’ within the meaning of the OFAC regulations and therefore blocked under the 1979 order (in which case they would be attachable under TRIA), or whether they are ‘uncontested’ and therefore unblocked under the 1981 order (in which case they would not be attachable under TRIA).”

“In resolving that question, the district court unfortunately did not have the benefit of briefing by OFAC, which only became involved in this matter on appeal. The court recognized that the 1981 order and regulations envision a ‘binary’ contest of ownership between Iran and an asset holder in the United States. ¼ The court, however, read TRIA as inserting the interests of a third‑party judgment creditor into that equation. An asset can become ‘contested,’ the court concluded, where the judgment creditor asserts Iran’s ownership of the property, ¼ ‘notwithstanding the absence of any contest between the actual holder and Iran,’ ¼ The court’s construction was based, in part, on the fact that, under Massachusetts law, ‘[a] creditor’s assertion that property held by a putative trustee belongs to the debtor and may be taken by the creditor for application against the debt is fundamental to trustee process.’ ¼”

“On appeal, OFAC directs our attention to the plain language of the 1981 order and regulation, which require a transfer only ‘as directed . . . by the Government of Iran.’ 46 Fed. Reg. at 7,923; 31 C.F.R. § 535.215(a). That, OFAC argues, is a condition precedent for the rest of what the regulations envision. Only if Iran directs the transfer of an asset being held in the United States must the property holder transfer the asset, or challenge Iran’s ownership by obtaining an opinion of counsel, see 31 C.F.R. § 535.333(c), which would make the asset ‘contested,’ id., at least until ownership is ascertained. In the absence of any claim by Iran, however, the asset remains ‘uncontested.’ Id. § 535.333(a).” [Slip op. 14‑19]

“Because Iran has never made a claim to, or directed transfer of, any of the antiquities at issue here, Rubin III, 810 F. Supp. 2d at 406 n.3; Rubin II, 541 F. Supp. 2d at 420, OFAC argues that the antiquities cannot be ‘contested’ for purposes of 31 C.F.R. § 535.333. We must defer to OFAC’s interpretation unless it is ‘plainly erroneous or inconsistent with the regulation[s].’ ¼ The fact that blocked assets play an important role in the conduct of United States foreign policy may provide a further reason for deference to the views of the executive branch in this case ¼ but we need not rely on that alternate ground, because we find OFAC’s interpretation to be a reasonable one.”

“We therefore defer to OFAC’s reasonable position that an asset can be ‘contested’ for purposes of 31 C.F.R. § 535.333 only if Iran itself has claimed an interest in the asset. ¼ Iran has never made such a claim with regard to the antiquities in the Museums’ possession. Thus, even if we assume that those antiquities qualify as ‘assets of’ Iran under section 201(a) of TRIA, they would be ‘uncontested’ assets that were unblocked in 1981, pursuant to Executive Order 12,281. The 1979 order and 31 C.F.R. § 535.201 are thus inapplicable here. Because the plaintiffs have relied on no other authority to support their claim that the antiquities are ‘blocked’ within the meaning of TRIA, we conclude that the antiquities are not attachable under that statute. TRIA §§ 201(a), (d)(2)(A).” [Slip op. 19‑21]

The Court then summarizes:

“While we are mindful of the incident that gave rise to the judgment here and the difficulty the plaintiffs are having collecting on that judgment, the general rule is that foreign sovereign property in the United States is immune from attachment and execution. See 28 U.S.C. § 1609. TRIA carves out a narrow exception to that rule, applicable only to ‘blocked assets,’ and the plaintiffs have failed to demonstrate that any of the antiquities in the Museums’ possession fall within that exception. TRIA therefore does not nullify the antiquities’ immunity from execution under the FSIA, and the plaintiffs have waived any challenge to that immunity on appeal.” [Slip op. 22]

The Court therefore affirms the District Court’s conclusion that the Museums’ motions to dissolve the attachments should be granted.

Citation: Rubin v. Islamic Republic of Iran, No. 11‑2144 (1st Cir. February 27, 2013).

SOVEREIGN IMMUNITY

U.S. Court of Appeals for the Eleventh Circuit largely affirms dismissal of lawsuits to recover on German bonds issued between World Wars I and II

In the following consolidated appeal, the Eleventh Circuit reviews claims by holders of bonds (“Bondholders”) that Germany issued in the period between World War I and World War II. The U.S. District Court for the Southern District of Florida ruled largely against the Bondholders.

Germany sold the bonds at issue to rebuild its economy after World War I, including the “Dawes bonds” offered in 1924 and the “Young bonds” offered in 1930 through the New York Stock Exchange. In 1928, fourteen German banks issued agricultural loan bonds known as “Agra bonds.” Most of the issuing banks were located in the territory that later became East Germany. Germany eventually defaulted on the Dawes and Young bonds, and held off on payments for the Agra bonds.

After World War II, West Germany and the U.S. entered into the London Debt Agreement (see below) to normalize economic relations. At the same time, the Parties signed a bilateral agreement with procedures on validating German bonds. The reason was that large numbers of bonds had likely been stolen by Soviet forces and could have been sold. Thus, bondholders had to prove that their bonds were located outside of Germany when Berlin was captured by Soviet forces.

The three lawsuits at issue are:

(1) World Holdings filed a complaint against Germany for breach of contract with respect to over 2,000 Dawes and Young bonds owned or controlled by World Holdings. Only 136 of the more than 2,000 bonds owned or controlled by World Holdings have been validated. The district court granted summary judgment to Germany because World Holdings could not recover on its unvalidated bonds because the 1953 Validation Treaty unambiguously required validation of Dawes and Young bonds before the bonds could be enforced in American courts. World Holdings could not recover on its validated bonds because its complaint was barred by the statute of limitations.

(2) Sovereign Bonds filed a complaint against Germany for breach of contract. The factual allegations in that complaint are nearly identical to those alleged by World Holdings. Sovereign Bonds holds eight kinds of municipal bonds in addition to its Dawes and Young bonds. But Sovereign Bonds concedes that these municipal bonds would be subject to the London Debt Agreement and the 1953 Validation Treaty if the Dawes and Young bonds are subject to those agreements. The district court dismissed the complaint because Sovereign Bonds had failed to allege that its bonds have been validated. The district court denied Sovereign Bonds request for limited discovery for factual exploration.

(3) Sovereign Bonds also filed a complaint in 2010 for breach of contract against Germany and several banks that Sovereign Bonds alleged were successors in interest to the banks that issued the Agra bonds. Sovereign Bonds argued that it was not required to validate its Agra bonds. With respect to its Agra bonds issued by banks in the territory that became West Germany, Sovereign Bonds repeated the argument of World Holdings that bondholders who did not assent to the settlement offer in the London Debt Agreement are not subject to the 1953 Validation Treaty. With respect to its Agra bonds issued by banks in the territory that became East Germany, Sovereign Bonds contended that those bonds were not subject to the Validation Law. The district court granted the motion by Germany to dismiss for lack of subject matter jurisdiction and for failure to state a claim. Because East Germany had never assumed the debt of the German Reich, the Federal Republic of Germany could not have assumed that debt upon reunification. The district court denied Sovereign Bonds discovery on the issue of validation.

The Bondholders appealed, and the Eleventh Circuit consolidated the appeals.

“[W]e must decide issues about the enforceability of German bonds issued during the period between World War I and World War II. The first appeal involves a complaint against the Federal Republic of Germany filed by World Holdings, LLC, for breach of contract regarding its Dawes and Young bonds. The second appeal involves a complaint against Germany filed by Sovereign Bonds Exchange, LLC, for breach of contract regarding its Dawes, Young, and municipal bonds. The third appeal involves a complaint against Germany and six German banks filed by Sovereign Bonds for breach of contract regarding its Agra bonds. These appeals present questions of subject matter jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1602–1611, and the interpretation of three post‑World War II treaties: the Agreement on German External Debts, Feb. 27, 1953, 4 U.S.T. 443, 333 U.N.T.S. 3, also known as the London Debt Agreement; the Agreement Between the Government of the United States of America and the Government of the Federal Republic of Germany Regarding the Validation of Dollar Bonds of German Issue, U.S.‑Fed. Republic of Ger., Feb. 27, 1953, 4 U.S.T. 797, also known as the 1953 Validation Procedures Treaty; and the Agreement Between the United States of America and the Federal Republic of Germany Regarding Certain Matters Arising from the Validation of German Bonds, U.S.‑Fed. Republic of Ger., Apr. 1, 1953, 4 U.S.T. 885, also known as the 1953 Validation Treaty.” [701 F.3d 644‑645]

The Court then addresses the threshold issue of sovereign immunity.

“Germany argues that it is immune from the suit by Sovereign Bonds to enforce its Agra bonds issued by banks located in the territory that became East Germany, but we disagree. ¼ In [World Holdings, LLC v. Federal Republic of Germany, 613 F.3d 1310, 1316 (11th Cir. 2010) (‘World Holdings I’)] we held that Germany was subject to suit by World Holdings to enforce its Dawes and Young bonds under the commercial‑activity exception of the Act because of ‘its issuance and sale of bonds in the United States.’ 613 F.3d at 1315. ¼ Based on our decision in World Holdings I, we must conclude that Germany is also subject to suit by Sovereign Bonds to enforce its Agra Bonds under the commercial‑activity exception.”

“Our holding in World Holdings I that the issuance of the bonds falls within the commercial‑activity exception to the sovereign immunity of a foreign nation controls the issue of jurisdiction over the complaint filed by Sovereign Bonds. ¼ Our decision in World Holdings I that the district court had subject matter jurisdiction under the commercial‑activity exception necessarily rests on the conclusion that Germany is the continuing state of the German state that issued the bonds. ¼ If Germany were anything other than the continuing state of the original issuer of the bonds, we would not have held that the relevant commercial activity was the issuance of the bonds. We instead would have had to examine whether Germany, as a successor state, had assumed the bond debt and, if so, whether that assumption constituted commercial activity. ¼ But as the continuing state that issued the bonds, Germany is liable for all of the bonds issued by Germany during the period between World War I and World War II. See Restatement Third of Foreign Relations § 208 cmt. a. (‘Under international law, the capacities, rights, and duties ... appertain to the state and are not affected by a mere change in the regime or in the form of government or its ideology.’).”

“Because the Agra bonds were issued by German instrumentalities, Germany is subject to suit to enforce those bonds. The Act defines a ‘foreign state’ to include ‘a political subdivision of a foreign state or an agency or instrumentality of a foreign state.’ 28 U.S.C. § 1603(a). A corporation may be an instrumentality of a foreign state if the foreign state owns a majority of the corporation’s shares. Id. § 1603(b)(2). The complaint filed by Sovereign Bonds alleges that the Agra bonds were issued by banks owned ‘in whole or in part and/or controlled by Defendant [Germany] or one of its states and/or municipalities’ and that ‘each province was legally responsible for all obligations of its bank.’ Construing the complaint in the light most favorable to the plaintiff, Sovereign Bonds has adequately alleged that the Agra bonds were issued in the United States by instrumentalities of Germany, and that commercial activity renders Germany subject to a suit in the United States to enforce those bonds. Insofar as the district court reached the opposite conclusion, the district court misread our precedent in World Holdings I.” [701 F.3d 649‑651]

The Court then explains that all bonds subject to the 1953 validation procedures must be validated before they can be enforced in U.S. Courts.

“The text of the 1953 Validation Treaty unambiguously requires the validation of the Dawes, Young, municipal, and Agra bonds at issue before they can be enforced in American courts ¼. Because of the unique nature of treaties as agreements between sovereigns, the Supreme Court has ‘traditionally considered as aids to its interpretation the negotiating and drafting history (travaux préparatoires) and the postratification understanding of the contracting parties,’ ¼ , but where the text is clear and ‘cannot be dismissed as an obvious drafting error,’ we must be governed by the text ¼ Article II of the 1953 Validation Treaty provides that ‘[n]o bond ... referred to in the first sentence of Article I above shall be enforceable unless and until it shall be validated.’ 1953 Validation Treaty, 4 U.S.T. at 889. Because ‘the first sentence of Article I’ incorporates the Schedule of Bonds in the Annex to the 1953 Validation Procedures Treaty, id. at 888–89, all bonds listed in that schedule are unenforceable in American courts until validated. The Dawes, Young, municipal, and Agra bonds are all listed in the Schedule.”

“Sovereign Bonds argues that the 1953 Validation Treaty applies only to the Agra bonds issued by banks in the territory that became West Germany, but that argument fails. Although the Agra bonds were issued by several different banks, some of which were located in West Germany and some of which were located in East Germany after World War II, the Annex to the 1953 Validation Procedures Treaty treats all Agra bonds as subject to validation. The Annex provides an authoritative translation of Article 73 of the Validation Law, which states that, when a class of bond has more than one issuer, a single Examining Authority is designated as the issuer for the entire class and the location of that Examining Authority determines whether the bonds are subject to the Validation Law. 1953 Validation Procedures Treaty, 4 U.S.T. at 866. The Examining Authority designated for the Agra bonds was the Deutsche Landesbankenzentrale located in West Berlin, so all Agra bonds were treated as West German for the purpose of validation. The Validation Law did not purport to operate in East German territory, but instead created an opportunity for holders of bonds issued in territory that would become East Germany to seek payment from the government of West Germany after validation. As Germany explained, this approach prevented bondholders of the same bond issue from being treated differently solely on the basis of the location of the issuer.” [¼]

“¼ The United States and West Germany created the validation requirement to address the concern that West Germany would have to use its limited post‑war resources to pay back illegitimate claims on bonds stolen by the Soviets. This concern about possible Soviet fraud is relevant both for claims made under the London Debt Agreement and for those made through separate legal procedures. It would undermine the purpose of the treaty to permit bondholders to simply ‘opt out’ of the validation requirement.”

“Our decision that the validation requirement applies to all bondholders, regardless of whether they had agreed to the settlement offer in the London Debt Agreement, is consistent with the decision of the Second Circuit in a similar appeal. ¼” [701 F.3d 651‑653]

The lawsuit by World Holdings regarding its validated bonds is untimely.

“World Holdings also argues that the district court erred when it held that the statute of limitations barred the complaint to enforce its validated bonds, but we disagree. The complaint to enforce the validated bonds is governed by New York law. ¼ In New York, ‘[t]he Statute of Limitations begins to run once a cause of action accrues, that is, when all of the facts necessary to the cause of action have occurred so that the party would be entitled to obtain relief in court.’ ¼ In the case of bonds, ‘the right to sue on the bond’s principal debt does not accrue until the debt is due and payable.’ ¼ And the statute of limitations will ‘begin to run on the day after maturity of the bonds.’ ¼ The parties agree that the Dawes bonds matured on October 15, 1949, and the Young bonds matured on June 1, 1965. The parties also agree that the relevant Dawes bonds were validated by July 15, 1964, and the relevant Young bonds were validated by June 14, 1960. And the parties agree that Germany completed its obligations under the London Debt Agreement on October 3, 2010. Contrary to the argument of World Holdings, the dispute between the parties is not about the accuracy of these dates, but about which date should be used as the accrual date for the purpose of measuring the limitations period. This dispute involves a question of law, not of fact. Because there is no genuine dispute about the relevant dates, no genuine issue of material fact barred the entry of summary judgment.” [¼]

“¼ Because the London Debt Agreement did not affect the running of the statute of limitations, the complaint by World Holdings to enforce its validated bonds is untimely under either the general six‑year statute of limitations, N.Y. C.P.L.R. § 213(a), or the twenty‑year statute of limitations for bond‑related actions, id. § 211(a). Under New York law, a cause of action regarding a bond accrues when that bond matures. ¼ The running of the statute of limitations is tolled until the bonds are validated, so long as the failure to timely validate the bond ‘was not due to [the bondholder’s] own gross negligence.’ 1953 Validation Procedures Treaty, 4 U.S.T. at 856. The Dawes bonds at issue matured on October 15, 1949, and were validated by July 15, 1964. The Young bonds were validated by June 14, 1960, and matured on June 1, 1965. Even under the more generous twenty‑year statute of limitations, World Holdings should have filed its complaint by July 15, 1984, and June 1, 1985, respectively. World Holdings did not file its complaint until January 23, 2008, more than twenty years too late.” [701 F.3d 653‑654]

The Court affirms the summary judgment in favor of Germany as to World Holdings case; vacates the portion of the Order that dismissed for lack of jurisdiction the complaint by Sovereign Bonds to enforce bonds issued in the territory that later became East Germany, and affirms the dismissal of both complaints by Sovereign Bonds.

Citation: World Holdings, LLC v. Federal Republic of Germany, 701 F.3d 641 (11th Cir. 2012).

TERRORISM

Eleventh Circuit interprets the meaning of “blocked assets” under the Terrorism Risk Insurance Act and finds that assets frozen pursuant to the Foreign Narcotics Kingpin Designation Act are not “blocked assets”

The following case discusses the meaning of “blocked assets” under § 201 of the Terrorism Risk Insurance Act of 2002 (Terrorism Act), Pub. L. No. 107‑297, 116 Stat. 2322. In particular, the Eleventh Circuit reviews whether assets frozen pursuant only to the Foreign Narcotics Kingpin Designation Act (Kingpin Act), 21 U.S.C. § 1901 qualify as “blocked assets” under the Terrorism Act. The Court concludes, based on the plain language of the statute, that such assets are not “blocked assets.”

The Plaintiffs/Appellees in this case were held hostage by the Revolutionary Armed Forces of Colombia (FARC) in the years 2003‑2008. FARC has been designated both (1) a “Specially Designated Global Terrorist” under the International Economic Emergency Powers Act (Economic Powers Act), 50 U.S.C. §§ 1701, 1702, as well as (2) a “Significant Foreign Narcotics Trafficker” (SFNT) under the Kingpin Act. Consequently, all FARC assets located in the U.S. are frozen.

The Plaintiffs/Appellees sued FARC in the U.S. District Court for the Middle District of Florida under the civil remedies provisions of the Anti‑Terrorism Act, 18 U.S.C. § 2333, seeking damages from FARC for terrorist acts committed while they were held hostage in the jungles of Colombia. In 2010, the Court issued a $318 million default judgment against FARC. As victim creditors, with perfected liens on all proceeds derived from FARC’s criminal activities, the Plaintiff pursued the assets of FARC associates._One such alleged FARC associate was a Colombian money exchange house, Mercurio International (Mercurio). In 2008, the Secretary of the Treasury and the Office of Foreign Assets Control (OFAC) determined that Mercurio had “act[ed] on behalf of and materially assist[ed]” FARC in laundering narcotics proceeds. Because FARC was sanctioned under the Kingpin Act, OFAC determined Mercurio should also be sanctioned as a “Specially Designated Narcotics Trafficker” (SDNTK) under the Kingpin Act and the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. § 598.314(b). Mercurio’s assets were frozen pursuant to the Kingpin Act.

The Plaintiffs/Appellees filed a motion for a Writ of Garnishment in the district court against Mercurio’s Kingpin Act frozen assets. Even though Mercurio was not named in the FARC judgment, they claimed that its assets could be garnished as the “blocked assets” of an “agency or instrumentality” of FARC.

Section 201(a) of the Terrorism Act, which provides in relevant part: “[I]n every case in which a person has obtained a judgment against a terrorist party on a claim based upon an act of terrorism . . . the blocked assets of that terrorist party (including the blocked assets of any agency or instrumentality of that terrorist party) shall be subject to execution or attachment in aid of execution in order to satisfy such judgment to the extent of any compensatory damages for which such terrorist party has been adjudged liable.”

The Plaintiffs/Appellees alleged all four of § 201(a)’s elements were met: (1) the judgment being enforced was against a terrorist party—FARC; (2) the judgment was based on FARC’s acts of terrorism; (3) Mercurio’s assets were “blocked assets” within the meaning of the Terrorism Act; and (4) garnishment against Mercurio would partially satisfy an award of compensatory damages. Essentially, Appellees argued that, because FARC is a judgment‑debtor “terrorist party” and Mercurio was designated an SDNTK under the Kingpin Act due to its alleged connection with FARC, Mercurio’s assets could be garnished as the “blocked assets” of a “terrorist party.”

The district court issued a writ of garnishment. Mercurio then moved to dissolve the writ of garnishment, which the district court denied. Mercurio appealed.

The U.S. Court of Appeals for the Eleventh Circuit reverses and remands. The plain language of Section 201(d)(2)(A) provides that the Terrorism Act’s “blocked assets” only covers those assets frozen under specified sections of the Trading Act and the Economic Powers Act. Mercurio’s assets were not frozen based on those Acts. Therefore, the district court erred in its interpretation of the Terrorism Act.

_The only issue here is the interpretation of § 201(d)(2) of the Terrorism Act, which defines “blocked assets” for purposes of that statute.

“Appellees contend that Mercurio’s assets are ‘blocked assets’ under the Terrorism Act because the Kingpin Act is historically connected and similar to one of the statutes expressly listed in § 201(d)(2)(A): the Economic Powers Act. Appellees claim the Kingpin Act’s history reveals it to be a ‘sub‑species’ of the Economic Powers Act.” [¼]

“In pertinent part, § 201(d)(2)(A) defines a ‘blocked asset’ to ‘mean[] . . . any asset seized or frozen by the United States under section 5(b) of the Trading With the Enemy Act [Trading Act] . . . or under sections 202 and 203 of the International Emergency Economic Powers Act [Economic Powers Act] . . . .’ Terrorism Act § 201(d)(2)(A).”

“The plain language of § 201(d)(2)(A) is unambiguous. The Terrorism Act defines what a ‘blocked asset’ ‘means,’ not what the term merely could ‘include.’ When a statutory definition declares what a term ‘means’ rather than ‘includes,’ any meaning not stated is excluded. ¼ This is because the term ‘means’ denotes an exhaustive definition, while ‘includes’ is merely illustrative. ¼ Section 201(d)(2)(A) declares that ‘blocked asset’ means an asset frozen under select provisions of the Trading Act and the Economic Powers Act. Assets frozen under the Kingpin Act, however, are absent from that definition. The unavoidable conclusion is that ‘blocked assets’ under the Terrorism Act does not mean assets frozen pursuant to the Kingpin Act.” [¼]

“Even if § 201(d)(2)(A)’s definition of ‘blocked assets’ were ambiguous, § 201(d)(2)(B)(I) forecloses the possibility that Kingpin Act frozen assets come within the definition of ‘blocked assets.’ According to § 201(d)(2)(B)(I), ‘blocked assets’ do ‘not include property that is subject to a license issued by the United States Government for final payment, transfer, or disposition . . . in connection with a transaction for which the issuance of such license has been specifically required by statute.’ Terrorism Act § 201(d)(2)(B)(I) ¼ The Kingpin Act, however, according to its text and accompanying regulations, requires the procurement of a government‑issued license before private individuals may execute against assets frozen under the Act. Thus, § 201(d)(2)(B)(I) further solidifies what the plain text of § 201(d)(2)(A) makes clear: assets frozen pursuant to the Kingpin Act are not ‘blocked assets’ under the Terrorism Act.” [Slip op. 7‑10] (Footnotes omitted).

Citation: Stansell v. Revolutionary Armed Forces of Colombia, No. 11‑11125 (11th Cir. January 9, 2013).