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

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

1997 International Law Update, Volume 3, Number 6 (June).

ARBITRATION

Citing international comity and U.N. Convention, Sixth Circuit affirms validity of contract clause requiring arbitration in Beijing despite claims that it is not an impartial forum

The contract between Da Hua Non-Ferrous Metals Co. (Hong Kong) and W.D. Mask Cotton Co. (Tennessee) for the sale of cotton went awry.  Da Hua was to resell the cotton to a third-party buyer in China.  The contract incorporated the rules of the International Chamber of Commerce.  If the parties cannot settle their disputes they were to go before the arbitration commission in Beijing or, if the parties agree, in a third country.  Da Hua filed suit to compel Mask to arbitrate.  The district court granted Da Hua summary judgment, requiring Mask to arbitrate in Beijing.  Mask argued that Beijing is not an impartial forum, and that settlement negotiations are necessary.

The U.S. Court of Appeals for the Sixth Circuit affirms.  Here, Da Hua unsuccessfully attempted to solve the matter without resorting to arbitration.  No further settlement attempts were necessary before resorting to arbitration.

Under the Federal Arbitration Act (9 U.S.C. § 2), arbitration clauses are valid except if legal or equitable grounds exist for revoking the contract. This policy requires federal courts to enforce agreements to arbitrate.  The policy favoring arbitration in this case is particularly strong because it involves an international agreement.

"The policy was strengthened in the area of international commerce with the addition of Chapter Two, 9 U.S.C. §§ 201-208, to the FAA, which implemented the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards ... The arbitration clause contained in the parties' contract for the sale of cotton falls 'under the Convention,' to which the United States and Hong Kong, as well as China, are parties. ... As a court of the United States, a signatory to the Convention, we are required in this case to refer the parties to arbitration.  Their agreement to arbitrate 'all disputes' is in writing; it provides for arbitration in China, a signatory country; it arises out of a contractual relationship between Da Hua and Mask for the purchase and sale of cotton, a commercial transaction; Da Hua is not an American citizen; and there is nothing in the record indicating that the agreement should be declared 'null and void, inoperative or incapable of being performed.'... 'Concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes' also mandate this result." [slip op. 9-10]

Citation:  Da Hua Non-Ferrous Metals Co., Ltd. v. W.D. Mask Cotton Co., No. 96-5430 (6th Cir., May 6, 1997).

CHOICE OF LAW

In federal patent infringement action, D.C. District Court declines to recognize British statutory privilege for communications between patent applicant and patent agent

Augusto Odone, who was a U.S. citizen at the time he developed the disputed technology, brought a federal patent infringement action against Croda International PLC. The matter apparently deals with "LCFA's" which in turn in some unclarified way seem to involve pediatric neuroscience.

Through an interrogatory and by deposing C. P. Wain, defendant's U.K. patent agent, plaintiff sought discovery of written communications between defendant and its patent agent dealing with whether defendant should name plaintiff as an inventor in the original British patent filings.

Defendant failed to answer the interrogatory and, at the deposition of Mr. Wain, raised an "attorney-client" privilege objection as to the documents sought.

It relied on § 280 of the British Copyright, Designs and Patents Act of 1988. The section provides in pertinent part that "any such [patent-related] communication ... between a person and his [duly registered] patent agent ... is privileged from disclosure in legal proceedings in England, Wales or Northern Ireland in the same way as a communication between a person and his solicitor..." Defendant argued that the district court should apply British privilege law because the communications did not "touch base" with the United States.

When plaintiff filed a motion to compel production pursuant to F.R.Civ. P. 37(a), the matter came before Magistrate Judge Patrick Attridge in the U.S. District Court for the District of Columbia. Judge Attridge grants the motion to compel.

In Judge Attridge's view, federal discovery is broad and liberal in its search for the true facts. Evidentiary privileges derogate from this vital function and thus courts should strictly construe even domestic privileges. Defendant argued that international comity should lead the judge to apply the British statute in this case. Judge Attridge, however, points out that comity is not a matter of obligation for a court with personal jurisdiction over the party resisting discovery.

While federal courts have from to time deferred to foreign privilege law, Judge Attridge notes, the common feature of those cases was that the communications in question dealt solely with activities that took place within a foreign country or related to transactions between parties from several countries other than the U.S.  Even in these cases, the courts often deny comity to foreign privileges that, as in this case, go counter to U.S. public policy. Unfortunately for defendant, it relies solely on its own conclusory assertions; it has failed to meet its burden of showing a lack of nexus with the U.S. by any competent evidence or affidavits.

In fact, the indications are quite otherwise. When he developed the patent, plaintiff was a U.S. citizen. Moreover, the priority of defendant's patent-in-suit admittedly rests on the prior British patent pursuant to the International Patent Cooperation Treaty. Finally, this suit is all about defendant's right to protection under letters patent from the U.S. Patent and Trademark Office. Judge Attridge finds that neither the federal common law attorney-client privilege nor any other federal privilege stands in the way of ordering production of defendant's communications with its British patent agent.

Citation: Odone v. Croda Int'l, PLC, 950 F.Supp. 10 (D.D.C. 1997).

In insurance litigation over sinking of fishing vessel, Ninth Circuit holds that Norwegian law governs the insurance contract but that Washington state law applies to tort allegations of bad faith

Fireman's Fund (Insurer) was the carrier for the "Alaskan Pride," a fishing vessel owned by Alaskan Pride Partnership (The Partnership). In February 1993, the vessel began to take on water, for no apparent reason, and then sank. Insurer denied coverage and filed an action in a Washington federal court that sought a declaratory judgment that its policy did not cover this type of loss. The Partnership counterclaimed, asserting coverage and bad faith on Insurer's part for failure to conduct a reasonable investigation into the cause of the sinking.

At the trial before a jury, issues arose about the admissibility of evidence and the propriety of jury instructions. As to jury instructions, instruction #14 told the jury that, under the Norwegian Insurance Plan, if insurer showed that the Alaskan Pride had sprung a leak while afloat, this would create a presumption of unseaworthiness. The Partnership would then assume the burden of proving coverage. Insurer, however, unsuccessfully tried to add to this instruction a similar shifting of burdens as to the bad faith claim.

From a judgment for the Partnership, Insurer appealed.  The U.S. Court of Appeals for the Ninth Circuit affirms.

The Court sees no merit in Insurer's claim of error in denying its modification of Instruction #14. Judge Wright concedes that Norwegian law governed the insurance contract and hence did apply to the shifting burdens on seaworthiness.  Nevertheless, Washington law governs the alleged tort of bad faith. Insurer implicitly acknowledged this when it based its trial arguments about bad faith entirely on Washington law.  Moreover, Insurer's theory would have been incorrect under the Washington law of insurance. That law imposes a strict duty on insurers to hold a reasonable investigation into claims made and requires that courts construe insurance contracts in favor of the insured. The fact that the cause of the sinking was unknown does not relieve insurers of the duty to investigate in good faith.

Citation: Fireman's Fund Insurance Companies v. Alaskan Pride Partnership, 106 F.3d 1465 (9th Cir. 1997).

EXTRADITION

In case of first impression, Ninth Circuit grants habeas to Italian extraditee who was arrested while giving deposition at U.S. law firm office, holding that authorities cannot "provisionally arrest" an individual based merely on showing that France has charged him with an extraditable crime

On October 18, 1995, as Giancarlo Parretti was giving a deposition at the Los Angeles office of White & Case, federal agents interrupted the proceedings and arrested Parretti. The company he headed bought MGM-United Artists for $1.3 billion in 1990.  That transaction, however, caused several lawsuits.

When Parretti came to the U.S. to answer charges of perjury and to give a deposition, France sent a diplomatic note to the U.S. Department of State, requesting his "provisional arrest" pursuant to the U.S.-France extradition treaty [22 U.S.T. 407, as amended, T.I.A.S. 7075].  A U.S. magistrate issued the arrest warrant based on information provided by an assistant U.S. attorney (AUSA) who was "acting on behalf of the Government of France."  The U.S. arrest warrant was based on allegations of a French arrest warrant.  According to the AUSA's information, Parretti had allegedly taken part in the looting of a French company, and France sought Parretti's "provisional arrest." Parretti was held without bail pending a decision by the French government whether to formally seek his extradition.

The district court denied Parretti's petition for habeas corpus and bail pending his extradition hearing.  The U.S. Court of Appeals for the Ninth Circuit, however, reverses.

Here, the sole basis for the AUSA's allegations of wrongdoing is the French arrest warrant.  The French arrest warrant, however, was not attached to the Complaint, nor were any affidavits or other competent evidence. 

The American judge effectively issued the arrest warrant without a probable cause determination.  The government told the district court a novel Fourth Amendment theory -- a warrant for a "provisional arrest" in an extradition case may be issued without an evidentiary showing that the accused has committed a crime.  If that were correct, the standard of probable cause would differ for foreign charges and for domestic charges.

"[T]he government asks us to give full faith and credit to a foreign charging document at the provisional arrest stage even though we do not give it full faith and credit for probable cause purposes at the extradition hearing stage. ... [T]he committing magistrate must make an independent judicial determination whether a factual basis exists for believing that the accused person committed an extraditable crime. ... Just as we do not accept the foreign charging document as a substitute for the customary showing of probable cause at the extradition hearing, we see no reason to accept it as a substitute for a judicial determination of probable cause at the provisional arrest stage." [24-25]

The Court therefore requires competent evidence that the accused committed an extraditable crime; the rule of judicial non-inquiry does not apply.

Moreover, this leads to an issue of first impression:  may a person be "provisionally arrested" and held for 40 days on a mere showing that he has been charged by a foreign government with an extraditable crime?  The Court answers "no."  Although other U.S. extradition treaties, for example the ones with Spain and Italy, require a showing of probable cause for provisional arrest, the extradition treaty with France does not.  It only provides that the U.S. can hold the arrested person for up to 40 days while France prepares the formal extradition request (see Article IV).

"[W]e must reject the government's invitation to carve out an exception to the probable cause requirement of the Warrant Clause for 'provisional arrests' pursuant to treaties. .. [T]he Bill of Rights limits the actions of government taken pursuant to treaties as well as statutes.  The Warrant Clause cannot be interpreted as allowing a lesser standard for arrests made for the purpose of enforcing treaty obligations than for arrests made for the purpose of enforcing our domestic laws.  It speaks of probable cause as a necessary condition of every arrest warrant, regardless of the governmental purpose served by the arrest." [39]

Therefore, Article IV of the extradition treaty with France violates the Fourth Amendment by providing for "provisional arrests" without an independent judicial determination of probable cause that the fugitive has committed the offenses charged.  Also 18 U.S.C. § 3184 [issuance of arrest warrants pursuant to extradition treaties] violates the Fourth Amendment to the extent it authorizes the issuance of "provisional arrest" warrants without a judicial probable cause determination.

The dissenter would have dismissed the appeal because the court released Parretti on bail and he promptly fled the country.

Citation:  Parretti v. United States, No. 95-56586 (9th Cir. May 6, 1997).  [Please note that the U.S. and France have prepared a new extradition treaty. See 1996 Int'l L. Update 71.]

JURISDICTION

(EXTRATERRITORIAL)

In damage action for fraudulent dealings in commodity and currency futures in Hong Kong, Seventh Circuit affirms dismissal for lack of jurisdiction where allegations of adverse effect on U.S. market were insufficiently specific

Michael Mak, a citizen of Hong Kong, invested in futures and options on futures at the Chicago Mercantile Exchange (CME) and other U.S. futures exchanges.  Mak relied on Hong Kong commodity brokers (Wocom) in placing the orders.  Mak's investments, however, never left Hong Kong.

Wocom allegedly "bucketed" Mak's orders.  "Bucketing" is a method of doing business wherein orders of customers for the purchase or sale of commodities for future delivery, instead of being executed by bona fide purchases and sales with other traders, are simply matched and offset in the soliciting firm's own office and the firm itself takes the opposite side of the customers' orders.  The district court dismissed for lack of jurisdiction.

The U.S. Court of Appeals for the Seventh Circuit affirms.  There is no doubt that "bucketing" is contrary to the United States Commodity Exchange Act [7 U.S.C. § 1].  The question is whether Mak as a foreigner can benefit from the Act by charging that he is the victim of foreign-based bucketing frauds. 

In the Seventh Circuit, subject matter jurisdiction over international disputes concerning commodity futures transactions depends largely on the "conduct" and "effects" tests.  The "conduct" must occur at a domestic exchange.  Clearly, that is not the case here.

Nor does Mak meet the "effects" case.  He argues that foreign bucketing can directly affect the U.S. just like improper trades done on American exchanges by foreign agents.  Mak's experts only offered the hypothetical effect that a foreign bucketing scheme could have on the U.S. commodities market and could not detail any particular injury to the CME or U.S. investors.  That the alleged fraudulent acts have an adverse effect on the American economy is insufficient for jurisdictional purposes.  To find jurisdiction, greater particularization is necessary.

"Our courts cannot assume jurisdiction of foreign actors whose foreign fraudulent activities might only be theorized to have had some vague and immeasurable effect on our markets.  Those foreign traders who want the protection afforded by our investment laws must either show contact with American exchanges or show particularized harm to our domestic markets.  The harm alleged in the present case would involve our courts in a battle of experts contesting theoretical, hypothetical, and marginal showings of harm difficult, if not impossible, to particularize.  If United States jurisdiction cannot be foreseen, the foreign fraud claims can be aired, we assume, in the jurisdictions where the parties did business and where the problem arose.  Foreign investors can make that jurisdictional determination before their trouble arises and then do business accordingly." [11-12]

Citation:  Mak v. Wocom Commodities Limited, No. 96-3179 (7th Cir. April 23, 1997).

In Lanham Trademark Act suit over similar product packaging, Second Circuit holds that preliminary injunction that orders defendant to transfer allegedly infringing product from its Chinese factory to U.S. storage site pending further order of court does not amount to invalid exercise of extraterritorial jurisdiction under Act

In February 1996, Fun-Damental Too, Ltd., a Pennsylvania limited partnership, brought a Lanham Act suit for trade dress infringement against Gemmy Industries Corp. and Kay-Bee Toys and Hobby Shops, Inc.   Plaintiff claimed that Gemmy copied the packaging of plaintiff's "Toilet Bank," a novelty "impulse" item first marketed in 1994 and used it with Gemmy's similar product the "Currency Can." Plaintiff has been marketing its product through toy chains such as Toys 'R' Us along with novelty shops and college book stores.  When flushed, the Toilet Bank makes a splashing sound and the coins drop from the bowl into a repository below.

Consumers have bought over 860,000 of plaintiff's product at prices ranging from $15 to $20 per unit.  In May 1995, Kay-Bee allegedly sent plaintiff's product to their Chinese factory where it designed and manufactured the "Currency Can" with dimensions almost exactly the same as that for plaintiff's product.  Lower Chinese overhead has enabled defendants to market their "Currency Can" for $9.99 each.

There are two differed types of trade dress situations: product configuration and product packaging.  Plaintiff displayed his product in a blue triangular box with a transparent plastic top. The box bore red letters with such statements as "REAL FLUSHING SOUND" and next to a lever, "TRY ME."  Defendants packaged their "Currency Can" in a very similar way.

At plaintiff's request, the district court held a hearing on the preliminary injunction issue. At the hearing, plaintiff's national sales manager testified that some retailers complained (apparently when they learned of the cheaper "Currency Can") because they thought that plaintiff was selling its "Toilet Bank" to other stores at much lower prices than plaintiff had charged them. Defendants complained that this testimony involved inadmissible hearsay under Fed.R.Evid. 801(c).  The court nevertheless ordered defendants to remove all "Currency Cans" from store shelves and to place them in storage pending the term of the injunction. It also ordered defendants to transfer all "Currency Cans" in the allegedly infringing packages located outside the United States to its American warehouse.

Plaintiff appealed the grant of the preliminary injunction. The U.S. Court of Appeals for the Second Circuit affirms.  For the first time on appeal, defendants complained that the order to Gemmy to transfer products from China to the U.S. was an faulty extraterritorial application of the Lanham Trademark Act. Since this raised only an issue of law and went to the prescriptive jurisdiction of a federal court, Judge Richard J. Cardamone agrees to consider the issue. In analyzing the limited extraterritorial effect of the Lanham Act, precedent lays out three questions the courts need to address: (1) does defendant's conduct have a substantial effect on U.S. commerce? (2) is defendant a U.S. citizen? and (3) is there an absence of conflict with trademark rights under foreign law? 

In Judge Cardamone's view, the answers support the lower court's action. "The injunction aims to regulate an aspect of Gemmy's conduct -- the importation of products--that clearly has substantial impact on United States commerce. To control the importation of the products in the packaging at issue, the district court reasonably required Gemmy to acquire the units in the allegedly violative packaging and ship them to the United States. Moreover, the injunction implicates only specific extraterritorial conduct of Gemmy, a United States corporation; the injunction does not prevent Gemmy or the Chinese factory from producing the Currency Can and selling it in different packaging. Nor has Gemmy pointed to anything that would indicate that this injunction creates a conflict of trademark rights under foreign laws." [slip op. 13]

Citation: Fun-damental Too, Inc. v. Gemmy Industries Corp., No. 96-7489 (2d Cir. April 4, 1997).

SOVEREIGN IMMUNITY

In wrongful death action after crash of Thai airplane, Ninth Circuit holds that plaintiffs cannot assert supplemental jurisdiction over Thai government entity as basis for district court's jurisdiction; payment by U.S. credit card abroad is insufficient to invoke FSIA "commercial activity" exception

The district court for the Northern District of California dismissed a wrongful death action by survivors of a 1992 crash of a Thai Airways plane for lack of subject matter jurisdiction and personal jurisdiction.  [The government of Thailand owns 92.86% of Thai Airways' stock; it is thus an instrumentality of the Kingdom of Thailand.]

The U.S. Court of Appeals for the Ninth Circuit affirms.   The district court did not err in declining to exercise supplemental jurisdiction under 28 U.S.C. § 1367 [federal courts have supplemental jurisdiction over claims related to an action over which the court has original jurisdiction].  Section 1604 of the Foreign Sovereign Immunities Act (FSIA) [28 U.S.C. 1604] grants a foreign state immunity except as provided in Sections 1605 to 1607 [exceptions to immunity].  Thus, a federal court cannot assert jurisdiction, supplemental or otherwise, over a claim against a foreign state in the absence of jurisdiction under the FSIA. 

The Court also rejects the argument that Thai Airways' conduct fell within the FSIA's "commercial activity" exception [28 U.S.C. 1605(a)(2)].  "[T]o fall within the exception ..., Appellants must allege that the Thai Airways crash, the act upon 'which the action is based,' caused a direct effect in the United States.  Appellants argue that Thai Airways' acceptance of payment by a credit card which was issued by a bank located in the United States and claim for payment against that bank constituted a direct effect of the Thai Airways crash.  Thai Airways' acceptance of payment by a credit card issued by a bank located in the United States was not an 'effect' of the Thai Airways crash at all.  Rather, Thai Airways' acceptance of the payment ... was the 'effect' of the purchase of an airline ticket by Appellants' decedents.  The type of effect referred to in section 1605(a)(2) is an effect resulting directly from the act complained of that 'is substantial and foreseeable.' ... Because Thai Airways' action in seeking payment on a credit card charge was not an effect of the Thai Airways' plane crash, their actions do not fall within the exception to immunity stated in § 1605(a)(2) and the district court was without jurisdiction in this case." [5-7]

Citation:  Nordmann v. Thai Airways Int'l, Ltd., No. 96-15103 (9th Cir. April 23, 1997).

TAXATION

Recent tax developments in Russia affect VAT exemptions for contributions to Russian companies with foreign investment, as well as VAT exemptions for technological equipment

The U.S. Department of Commerce has publicized some new tax developments in the Russian Federation:

- Under Federal Law No. 54-FZ of March 17, 1997, goods imported as a contribution to the charter capital of Russian companies with foreign investment are exempt from both VAT and customs duty.  The exemption applies only to production assets which are not subject to excise duties and are included in the "main production fund" (must appear in the All-Russian Classifier of Main Production Funds, OK-94).

- Under Federal Law No. 73-FZ of April 28, 1997 (Amendments to the VAT Law of the Russian Federation), the VAT exemption for imports of technological equipment has been abolished.  Imports of technological equipment under qualifying contracts concluded and properly registered with the Customs authorities before the effective date may be exempt from VAT in 1997.  The effective date is April 30, 1997.  The Customs authorities, however, have not yet provided a procedure for registering such contracts.

Citation:  The above information was received from the U.S. Department of Commerce, Russian Desk, Phone: (202) 482-2296 or 482-4655.

TRADE

Mexico to stimulate its exterior commerce with increased trade fairs and commercial companies

The Mexican government has issued two decrees with the purpose of increasing international trade.  The Decree for the Establishment of Foreign Commerce Companies grants certain benefits and privileges to companies involved in international trade.  Companies may register themselves as such with the Department of Commerce and Industrial Development (Secretaría de Comercio y Fomento Industrial).  Products and materials for export receive favorable tax and customs treatment.  The government will also provide financial and technical support; the National Bank for Foreign Commerce will provide financial services at reduced costs.

The Decree for the Increase of Mexican Export Fairs is designed to promote Mexican exports by publicizing Mexican products internationally.  To receive government benefits, the Department of Commerce and Industrial Development must certify organizers of trade fairs (Certificado de Ferias Mexicanas).  The benefits include financial and technical support, as well as loans from the National Bank of Foreign Commerce.

The effective date of the decrees was April 12, 1997.

Citation: Decreto para el establecimiento de empresas de comercio exterior; Decreto para el fomento de ferias mexicanas de exportación, 1997 Diario Oficial de la Federación [Mexican Official Gazette], April 11, 1997.

WAR CRIMES

U.S. Department of State issues preliminary report on Nazi theft of gold and other assets

On May 7, 1997, the U.S. Department of State issued a "Preliminary Study on U.S. and Allied Efforts to Recover and Restore Gold and Other Assets Stolen or Hidden by Germany During World War II."  The study was prepared by William Slany, Historian, Dept. of State, and coordinated by Stuart E. Eizenstat, Under Secretary of Commerce for International Trade.

The study attempts to document what it calls "one of the greatest thefts by a government in history: the confiscation by Nazi Germany of an estimated $580 million of central bank gold -- around $5.6 billion in today's values -- along with indeterminate amounts of other assets during World War II."  These assets were stolen from governments and civilians in the countries occupied by Germany.  The study describes U.S. and Allied efforts to recover those assets for the reconstruction of Europe after the war.  Switzerland figures prominently as one of the countries that accepted the stolen assets and thereby helped sustain the Nazi dictatorship.

As part of the study, 15 million pages of documents were reviewed.  Between 800,000 and 1 million pages of documents were declassified and made available to researchers.  Among the conclusions of the study are:

- The massive and systematic plundering of gold and other assets from conquered nations was essential to the financing of the German war machine.

- Neutral countries such as Argentina, Portugal, Spain, Sweden, Switzerland and Turkey continued trade with Nazi Germany, which supported and prolonged World War II.

Citation:  The study is available via the www homepage of the International Trade Administration http://www.ita.doc.gov/media, from the press office of the U.S. Department of State, Phone: (202) 647-6925, or at the Department's www site http://www.state.gov.

- U.S. and Australia conclude MLAT.  On April 30, 1997, the U.S. and Australia signed a Mutual Legal Assistance Treaty (MLAT).  The purpose is to promote law enforcement in criminal cases.  The types of mutual legal assistance are similar to those in other U.S. MLATs and include taking testimony or statements; providing documents, records and other evidence; transferring persons in custody for testimony and other purposes; locating and identifying persons; serving documents; executing requests for searches and seizures; and freezing assets.  The treaty will soon be submitted to the U.S. Senate for advice and consent, along with several similar ones that have recently been concluded. -- In the Asia-Pacific region, the U.S. has an MLAT with Thailand, signed one with South Korea, and recently concluded one with Hong Kong.  Citation: U.S. Department of State Press Statement (April 30, 1997).

- Mexico publishes protocol to U.S.-Mexico agreement on satellite TV.  The Mexican Official Gazette has published the protocol regarding the direct-to-home transmission of satellite signals for TV.  The purpose is to establish technical criteria for broadcast signals transmitted by satellites, as well as requirements for licensing, programming, commercials.  The effective date is November 11, 1997.  Citation:  1997 Diario Oficial de la Federación [Mexican Official Gazette], April 7, 1997.

- U.S. makes more changes to adapt regulations on transport of hazardous materials to international rules.  The U.S. Department of Transportation, Research and Special Programs Administration (RSPA), has issued more regulatory changes to adapt U.S. regulations to changes in international rules for the carriage of hazardous materials (see 1997 Int'l L. Update 10).  The final rule incorporates recent changes to the Maritime Dangerous Goods Code (IMDG Code), the Technical Instructions for the Safe Transport of Dangerous Goods by Air (ICAO Technical Instructions), as well as the United Nations recommendations on the transport of hazardous materials.  Citation: 62 Federal Register 24690 (May 6, 1997).

- U.S. Department of Commerce streamlines and strengthens antidumping laws.  In order to fulfill obligations of the Uruguay Round Trade Agreement, the U.S. Department of Commerce has revised antidumping regulations [19 C.F.R. Parts 351, 353, 355].  The new 19 C.F.R. Part 351 replaces parts 353 and 355.  Subpart A contains general definitions for antidumping and countervailing duty proceedings, the record for such proceedings, de minimis standards for countervailable subsidies and dumping margins, and the rates to be applied.  Subpart B contains sets forth the procedures for such proceedings.  Subpart C provides rules for the submission of information, verification, and the determination of facts.  Subpart D provides methodologies for identifying and measuring dumping.  The effective date of the final rule is June 18, 1997.  Citation:  62 Federal Register 27296 (May 19, 1997).  [For more information, please call the Department at (202) 482-3058, (202) 482-4883 or (202) 482-3809.]

- Various nations have recently signed or become parties to multilateral conventions on children, prisoners, chemical weapons, and human rights.  In October 1996, Sweden signed the convention on protection of children and cooperation in respect of intercountry adoptions [see 32 I.L.M. 1134 (1993)].  The U.S. has signed but not yet ratified this convention.  During 1996, Hungary, Moldova, the Philippines and Swaziland have ratified the convention on the prohibition of the development, production, stockpiling, and use of chemical weapons and on their destruction, with annexes [see 32 I.L.M. 800 (1993)].  The same year has seen the ratification of the convention on the transfer of sentenced persons [see 22 I.L.M. 530 (1983)] by Lithuania and Romania and its signing by Latvia.  In October 1996, Thailand acceded to the international covenant on civil and political rights (ICCPR) [see 6 I.L.M. 368 (1967)].  The U.S. ratified the chemical weapons convention in April 1997, the prisoner transfer convention as of July 1985 and the ICCPR (with heavy qualifications) in September 1992.  Citation: 36 I.L.M. 514-15 (1997).

- International Legal Materials publishes chart showing current status of Hague conventions on private international law.  The chart shows the status of these conventions as of April 8, 1997.  Of the twenty-four Hague conventions, the most widely ratified or acceded to include: the legalisation convention (57 nations), the convention on the civil aspects of international child abduction (46 nations), the convention on civil procedure (39 nations),  the convention on service of documents abroad (36 nations), and the convention on the taking of evidence abroad (28 nations).  The following nations are among the most active in ratifying or signing Hague conventions: the Netherlands (24r/4s), France (18r/3s), Luxembourg (15r/9s), Spain (15r/3s), Italy (14r/5s), Portugal (14r/5s), and Belgium (10r/5s).  The United States has become a party to the conventions on legalisation, service abroad, taking of evidence, child abduction. It has also signed the conventions on trusts and on co-operation in adoptions.  Citation: 36 I.L.M. 516-17 (1997).

- Active WTO panels involving the U.S.  Currently, the following pending WTO disputes involve the U.S. (complainant named first):

Ecuador, Guatemala, Honduras, Mexico, U.S. - EC, Regime for the importation, sale and distribution of bananas.

U.S. - EC, Measures affecting meat and meat products (hormones).

U.S. - Japan, Measures affecting consumer photographic film and paper.

U.S. - India, Patent protection for pharmaceutical and agricultural chemical products.

Argentina, Australia, New Zealand, U.S. - Hungary, Export subsidies in respect of agricultural products.

U.S. - Argentina, Certain measures affecting imports of footwear, textiles, apparel and other items.

U.S. - EC, Customs classification of certain computer equipment. Citation:  1997 WTO Focus, No. 16, page 7 (as of March 11, 1997, revised by Editors).

SPECIAL FEATURE: Recent Developments in Commercial Arbitration in the Republic of Lithuania -- by Thomas W. Welch

In an attempt to encourage foreign investment and improve the fairness and propriety of the resolution of commercial disputes arising from the new free market activities in Lithuania, two competing non-governmental organizations, the Vilnius International Commercial Arbitration Tribunal [V.I.C.A.] and the International Chamber of Commerce [I.C.C.], are attempting to organize the first commercial arbitral institutions in Lithuania.

Like its other Balkan neighbors, Lithuania has recently become a party to the 1958 New York Convention On The Recognition And Enforcement of Foreign Arbitral Awards.[FN1]  Moreover, with the help of western consultants, the Lithuanian Seimas [Parlament] recently passed the Lithuanian Law on Commercial Arbitration (hereinafter "Commercial Arbitration Law"),[FN2] based roughly upon the UNCITRAL Model Law On International Commercial Arbitration.[FN3]  Despite the nascent state of commercial and arbitration laws in Lithuania and loopholes in the new laws, there is hope that these institutions may help alleviate a growing civil enforcement problem arising from the ongoing conversion from a Marxist to capitalist economy.

The new Lithuanian Commercial Arbitration Law applies to both "international" and "domestic" disputes.   Unfortunately, the new law expressly excludes many types of claims common in commercial cases.  For example, Article 11 (1) of the law excludes "disputes arising from constitutional, labor, family, and administrative legal relationships."  In a country where the "constitution" is still largely unconstrued, all business ventures are considered to involve "labor" and many commercial matters are still handled "administratively."  These exclusions are likely to be exploited.

The law also excludes such typical commercial matters as "disputes relating to competition, patents, trade and service marks and bankruptcy."  So-called "consumer agreements" are also declared inarbitrable, without there being any definition of such consumer relationships under any Lithuanian law.

Finally, Art. 11(2) of the new law excludes disputes in which one of the parties is "a state-owned or local government owned enterprise." In Lithuania, the state still maintains at least some ownership interest in nearly all banks and other established joint stock companies.

Judicial enforcement of arbitration awards will be problematic for more intrinsic reasons.  Western style arbitration is still largely unknown to the judiciary in Lithuania, and recognition is thus potentially fraught with difficulty.  In fact, there is only one reported recognition of a foreign arbitral award by the Lithuanian Ministry of Justice, and that award resulted from an arbitration arising from a Lithuanian joint venture between a Swedish company and a Lithuanian government-owned entity.  Because the parties ultimately settled and the Lithuanian government voluntarily paid that award, its precedential value is doubtful.

Even if an arbitration award is recognized, court enforcement of the award against a privately owned, commercial stock company in Lithuania is still arduous.  Local constables are poorly equipped to enforce even court judgments (90% of which reportedly go unsatisfied in civil cases).  There is no security interest registry, scant commercial law, and almost no compulsory, post-judgment procedures that would prevent the secreting away of local assets to third-parties and/or to other jurisdictions.  Given the nascent state of commercial laws in Lithuania, many foreign direct investors now typically secure their interests through a confession of judgment agreement on real property involved.  Upon default, a Lithuanian Notary is thus empowered to permit immediate execution upon such property.  There is scant expectation that any movables, too, will be recovered.  In such situations, there is little necessity for the additional expense and delay concomitant with untested commercial arbitration.

Many Lithuanians nonetheless hope that if they establish a reputable arbitration institution of their own, foreign companies will see commercial benefits in arbitrating there, particularly since the witnesses, evidence and attachable assets, if any, may still be there.  The fledgling arbitration centers intend to charge lesser administrative fees than the Commercial Courts and their more established, foreign counterparts.  Many Lithuanians also see

a potential new role as a "bridge" to their former eastern partners, like Russia and the Ukraine, with whom they have intimate relations and bi-lateral treaties for judicial enforcement.[FN4]  With a respected arbitration institution, and after the planned adherence to the Brussels/Lugano Enforcement Convention with the E.F.T.A. countries, Lithuanian judgments and awards could someday receive recognition and enforcement throughout the West. 

For more information, you may contact the Central and Eastern European Law Initiative's Commercial Law Center in Vilnius, located at Gedimino 24-9, Vilnius 2600 Lithuania, Phone: (370-2) 22-66-45, or (370-2) 61-14-41; Fax: (370-2) 61-14-79.

NOTES

Thomas Welch is an attorney practicing in Washington, D.C., who recently served as an International Arbitration Specialist for the Central and Eastern European Law Initiative program of the American Bar Association.  Mr. Welch has also practiced in Texas, France, Belgium, Germany and New York.

1. By Resolution of the Seimas of the Republic of Lithuania, No. I-760, dated January 17, 1995.

2. Identified as Law No. I-1274, dated April 2, 1996.

3. UN Doc A/40/17, adopted 21 June 1985.

4. The actual utility of the bilateral agreements on mutual legal assistance with Russia, Poland, Ukraine, Moldovia-Estonia and other former COCOM partners is uncertain, as those agreements also contain vague exceptions that enforcement may denied if it "is contrary to sovereignty, security or fundamental legal principals..."  See, e.g., Art. 18 of the Agreement of the Republic of Lithuania And The Russian Federation On Legal Assistance And Legal Relations In Civil, Family And Criminal Cases (concluded July 21, 1992).

Citation:  Article received from Mr. Thomas Welch.