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.

1996 International Law Update, Volume 2, Number 2 (February).

ARBITRATION

First Circuit affirms exequatur action in Puerto Rico to enforce Israeli default judgment based on defendant's waiver of arbitration

Menorah Insurance Company (Menorah) of Israel concluded seven reinsurance agreements with INX Reinsurance Corporation (INX) of Puerto Rico. The arbitration clause provided that the parties would settle "all disputes in an equitable rather than in a strictly legal manner" in the forum of Tel Aviv, Israel. When Menorah made a claim for over $750,000, INX argued that it owed only $178,000. When Menorah later told INX that it would seek arbitration, INX answered that it would not arbitrate because its financial situation would not permit it.

Menorah sued INX in Tel Aviv. After INX filed to answer the complaint, Menorah obtained a $812,907 default judgment and then sought an exequatur to enforce the judgment in the Superior Court of Puerto Rico. After waiting one year, INX removed the case to the U.S. District Court for Puerto Rico under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards [9 U.S.C. § 201 (1994)]. The district court found that INX had waived arbitration and remanded the matter to the Superior Court. INX appealed, claiming that the court should have sent the dispute to arbitration.

The U.S. Court of Appeals for the First Circuit affirms. After pointing to the strong U.S. policy favoring arbitration, the Court concludes that INX had explicitly waived arbitration by declining to arbitrate when Menorah first requested it.

Furthermore, INX's entire course of conduct was a waiver by implication. The First Circuit has held that parties may waive their right to arbitration and present their dispute to a court. For plaintiffs to prevail on their claim of waiver, they must show prejudice. Because the Court finds ample prejudice, it does not review the "totality of the circumstances" which has been used by other courts to establish waiver.

"The period of delay here was not one in which information useful to the ultimate resolution of the dispute was being procured through discovery. ... There was no error in the district court's finding that Menorah incurred expenses as a direct result of INX's dilatory behavior and that was prejudice enough." [10-11]

Citation: Menorah Ins. Co., Ltd. v. INX Reinsurance Corp., No. 95-1495 (1st Cir. December 26, 1995).

In suit over disappearance of ship and crew in "Bermuda Triangle," Eleventh Circuit holds that, by failing to invoke arbitration clause in earlier litigation involving insured as defendant, insurer waived arbitration against wrongful death plaintiffs

On December 18, 1975, the M/V IMBROS with eighteen crew members disappeared at sea without a trace in the Bermuda Triangle region. The vessel was registered to, and managed by, two Cypriot corporations having insurance against various losses (including loss of life) with West of England Ship Owners Association (West). Any disputes under the policy were to go before a single arbitrator in London prior to the bringing of court action. Stephen Morewitz, administrator of the estates of several deceased crewmen, brought successful wrongful death actions against the Cypriot corporations in a Virginia federal Court. The court dismissed one defendant for lack of personal jurisdiction while the other defendant had become insolvent.

Morewitz then sued West to enforce the judgment in an Alabama federal court. When the lower court dismissed for lack of jurisdiction on the grounds that the suit arose under English bankruptcy law, Morewitz secured a reversal from the U.S. Court of Appeals for the Eleventh Circuit in 1990. The Court held that the suit rested on the maritime insurance contract giving federal courts admiralty jurisdiction under 28 U.S.C. § 1333. On remand, Morewitz abandoned his reliance on English bankruptcy law and instead invoked the Alabama "direct action" statute. On a defense motion, however, the trial court stayed proceedings pending arbitration. After Morewitz declined to arbitrate, the district court dismissed his suit with prejudice.

Again on appeal, the Eleventh Circuit reverses and remands. It first notes that, unlike the Alabama "direct action" statute, English law requires the insured to first satisfy a judgment before seeking recourse against its insurer, thus making arbitration under English law futile.

Conceding that English law would govern the substantive contract issues, the Court characterizes the direct action issue as "procedural" and thus governed by forum law. Under it, the insurer usually retains all defenses against tort plaintiffs that it would have in a suit by the insured, including arbitration.

Without deciding these issues, however, the Court concludes that West had waived any right to arbitration it might have had. West defended the insured in the Virginia litigation in the mid 1970's but never raised the arbitration issue there. Having waived its arbitration rights against its insured, it waived them against Morewitz in his 1985 suit.

Citation: Morewitz v. West of England Ship Owners Mutual Protection and Indemnity Ass'n, 62 F.3d 1356 (11th Cir. 1995).

AVIATION

In wrongful death litigation arising from crash of Korean Air Liner over Sea of Japan, U.S. Supreme Court unanimously reverses Second Circuit and holds that Death on High Seas Act (DOHSA) limits recovery to pecuniary damages

On September 1, 1983, Soviet aircraft shot down Korean Air Lines (KAL) flight KE007 which had strayed into Soviet air space over the Sea of Japan, killing all 269 passengers. According to experts, the plane had remained airborne for about twelve minutes after the missiles hit it. In a suit in New York federal court pursuant to Article 17 of the Warsaw Convention of 1929 [49 Stat. 3000, T.S. No. 876 (1934)], two relatives of a deceased passenger won a total jury verdict of $375,000 for loss of society, mental injury and grief, conscious pain and suffering and loss of support and inheritance. KAL appealed claiming that the Death on the High Seas Act (DOHSA) applied and that it expressly limited recovery to pecuniary damages.

The Second Circuit affirmed in part and reversed in part. It held that federal maritime law governed, not DOHSA, but that plaintiff would have to show dependency in order to recover loss-of-society damages [See Zicherman v. Korean Air Lines Co., Ltd., 43 F.3d 18 (2nd Cir. 1994); 1995 Int'l L. Update 11 (October)].

In a unanimous opinion written by Justice Antonin Scalia, the U.S. Supreme Court reverses. It rules that DOHSA, not federal judge-made maritime law, governs the measure of damages in an action under Article 17 and that DOHSA bars relatives of the deceased passenger from recovering any loss-of-society damages. While Article 17 does allow recovery for legally compensable harm, the text, negotiating history, post-ratification practice and the views of almost all commentators show that it left the determination of the type of damages recoverable to the domestic law of the member states. (Both sides had agreed that, under this judicial view, the law of the United States should control.)

As to the choice of which particular U.S. law applied, Justice Scalia concludes that this air crash on the high seas fell within § 761 of DOHSA. Under § 762 of DOHSA, recovery "shall be a fair and just compensation for the pecuniary loss sustained ..."  Justice Scalia rejects plaintiffs' claim that the Warsaw Convention authorized its member states' courts to fashion a uniform rule of damages for over-land and over-sea accidents in derogation of otherwise applicable law.

Finally, plaintiffs argued "that the Warsaw Convention's $75,000 per passenger limit on liability (except in cases of willful misconduct), when combined with a DOHSA rule prohibiting compensation for non-pecuniary harm, will not sufficiently deter willful misconduct. We are unpersuaded. The Convention unquestionably envisions the application of domestic law; it is the function of Congress, and not of this Court, to decide that domestic law, alone or in combination with the Convention, provides inadequate deterrence." [9]

Citation: Zicherman v. Korean Air Lines Co., Nos. 94-1361 & 1477, 64 U.S.L.W. 4055 (S.Ct. January 16, 1996).

District of Columbia Circuit holds that widower of woman killed in international air crash lacks standing as such to sue under Warsaw Convention and DOHSA if not also "personal representative" of deceased

In September 1983, Soviet aircraft shot down Korean Airlines (KAL) flight 007, killing all 269 passengers aboard. The multidistrict panel assigned the liability issue to the U.S. District Court for the District of Columbia. That court found "willful misconduct" by KAL under the Warsaw Convention and was affirmed. Individual plaintiffs were then to return to their court of origin for determinations of damages.

Alexander Alcabasa, claiming to be the widower of Lilia Bayona, a deceased passenger formerly domiciled in New Jersey, sued KAL in his individual capacity in the District of Columbia federal court. Later, a New Jersey state court appointed Lilia's brother, Filino, as her personal representative. Filino then sued KAL in New Jersey federal court and later settled for $450,000. The District of Columbia court granted summary judgment to KAL on the grounds that Alcabasa was not Lilia's "personal representative" under D.C. law as mandated by Article 24(2) of the Warsaw Convention. Alcabasa took an appeal.

The U.S. Court of Appeals for the District of Columbia Circuit affirms but on different grounds. Since the Convention refers the question of standing to member state law, the Court focuses on whether this means federal or local law. Supreme Court precedent holds that the Death on the High Seas Act (DOHSA) applies to international air transport and that it preempts inconsistent state law. DOHSA clearly confers standing only on the passenger's "personal representative" as appointed by the appropriate state court and not merely upon an heir. Though the Second Circuit has recently ruled that DOHSA does not govern the measure of damages in this type of case, see Zicherman v. Korean Airlines, Co. Ltd. [see 1995 Int'l L. Update 10 (October); reversed by U.S. Supreme Court, above], the Court finds that DOHSA does control as to standing. Plaintiff cannot force KAL to litigate issues it had a right to believe were settled in 1993.

Citation: Alcabasa v. Korean Air Lines, Co. Ltd., 62 F.3d 404 (D.C.Cir. 1995).

BANKING

FDIC qualifies spot and other short-term foreign exchange agreements and repurchase agreements as "qualified financial contracts" under FDI Act

The Federal Deposit Insurance Corporation (FDIC) has issued a final rule to include spot and other short-term foreign exchange agreements and repurchase agreements on qualified government securities within the definition of "qualified financial contracts" under the Federal Deposit Insurance (FDI) Act. Sections 11(e)(8) through (10) of the FDI Act [12 U.S.C. 1821(e)(8) through (10)] provide special rules for the treatment of qualified financial contracts in the event the FDIC is appointed receiver or conservator for an insured depository institution. For example, the FDI protects parties to qualified financial contracts by permitting the liquidation, termination, and netting of their agreements. The FDIC has determined that such agreements are similar to SWAP agreements (which are included with the qualified financial contract provisions of the FDI Act).

The rule makes clear that short-dated foreign exchange transactions such as spots, tomorrow/next day and same day/tomorrow transactions are similar to those agreements identified within the statute as SWAP agreements. It also expands the definition of "qualified financial contract" to include repurchase agreements on securities issued or guaranteed by the central governments of countries that are either full OECD members or have concluded special lending arrangements with the IMF.

The effective date of the rule was December 27, 1995.

Citation: 60 Federal Register 66863-01 (December 27, 1995).

U.S. Federal Reserve issues rules on international operations of U.S. banking organizations

Regulation K of the Board of Governors of the U.S. Federal Reserve System contains the rules for foreign activities of U.S. banking organizations, including procedures for investing in foreign banking and non-banking organizations. Under Section 211.5(c), U.S. banks must make all such investments according to the general consent, prior notice, or specific consent procedures. Certain investments require no prior consent.

The Board has issued a final rule regarding the international operations of U.S. banking organizations that are strongly capitalized and well managed. The rule amends Subpart A of Regulation K to provide expanded general consent authority for investments in foreign companies by U.S. banking organizations. This expanded authority is designed to permit qualified U.S. banks to make larger investments without the need for prior approval or review. An investor who takes advantage of this rule must provide the Board with certain post-investment information.

The effective date of the rule was December 21, 1995.

Citation: 60 Federal Register 67050-01 (December 28, 1995).

FORUM NON CONVENIENS

See Bybee case under Sovereign Immunity.

JUDGMENTS

See Menorah case under Arbitration.

JUDICIAL ASSISTANCE

Mexico publishes list of competent Mexican authorities under Legalisation Convention

Effective 15 August 1995, Mexico acceded to the 1961 Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents [20 I.L.M. 1409 (1981), T.I.A.S. 10072] to which the United States and 47 other nations are parties. The purpose of the Convention is to abolish the requirement of diplomatic and consular "legalisation" for foreign public documents, often involving a long chain of authenticating certificates. Under the Convention, each contracting State shall exempt from legalisation documents to which the present Convention applies and which have to be produced in its territory.

For the purposes of the Convention, "legalization" means only the formality by which the diplomatic or consular agents of the country in which the document has to be produced certify the authenticity of the signature, the capacity in which the person signing the document has acted and, where appropriate, the identity of the seal or stamp which it bears. The Convention establishes a simplified system whose key elements are (a) substitution of a standard certificate bearing one signature, the Apostille, for the chain‑certificate, and (b) abolition of diplomatic or consular authentication of that certificate.

The Austrian Bundesgesetzblatt published the following list of the competent Mexican authorities:

Legalization ("apostille") of documents of the federal state:

ESTADO DE AGUASCALIENTES, DELEGACION, PLAZA DE LA PATRIA 141, ESQ. PLAZA DE LA REPUBLICA, C.P. 20000 AGUASCALIENTES, AGS.

ESTADO DE BAJA CALIFORNIA, DELEGACION, CALLE PEDRO F. PEREZ Y RAMIREZ 202 ZONA CENTRO, C.P. 21000 MEXICALI, B.C.

ESTADO DE BAJA CALIFORNIA SUR, DELEGACION, MELITON ALBANES LOCAL 2, ENTRE ALLENDE Y JUAREZ, FRACCIONAMIENTO PERLAS,

C.P. 23040 LA PAZ, BAJA CALIFORNIA SUR.

ESTADO DE CAMPECHE, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE LOS PODERES, 4°PISO, CALLE N°8, S/N, COL. CENTRO, C.P. 24000 CAMPECHE, CAMP.

ESTADO DE COAHUILA, PALACIO DE GOBIERNO, 2°PISO, PLAZA DE LAS ARMAS ENTRE CALLE ALLENDE Y CALLE JUAREZ, CENTRO, C.P. 25008 COAHUILA, SALTILLO.

ESTADO DE COLIMA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, CALLE REFORMA E HIDALGO, COL. CENTRO, C.P. 28000 COLIMA, COL.

ESTADO DE CHIAPAS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, 2°PISO, AV. CENTRAL Y 1°DE ORIENTE, COL. CENTRO,

C.P. 29000 TUXTLA GTZ., CHIS.

ESTADO DE CHIHUAHUA, DELEGACION, VENUSTIANO CARRANZA 815, EDIF. HEROES DE LA REVOLUCION, C.P. 31000 CHIHUAHUA, CHIH.

ESTADO DE DURANGO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO S/N, CALLE 5 DE FEBRERO, COL. CENTRO, C.P. 34000 DURANGO, DGO.

ESTADO DE GUANAJUATO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PASEO DE LA PRESA N°103, 1°PISO, C.P. 36000 GUANAJUATO, GTO.

ESTADO DE GUERRERO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. MIGUEL ALEMAN N°1, COL. CENTRO, C.P. 39009 CHILPANCINGO, GRO.

ESTADO DE HIDALGO, SECRETARIA DE GOBIERNO, PALACIO DE GOBIERNO,

PLAZA JUAREZ S/N, 2°PISO, COL. CENTRO, C.P. 42000 PACHUCA, HGO.

ESTADO DE JALISCO, DELEGACION, CALLE R. MICHEL Y LOS ANGELES,

SALA 1, EDIF. ANTIGUA CENTRAL CAMIONERA, C.P. 44100 GUADALAJARA, JAL.

ESTADO DE QUERETARO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PASTEUR Y CORREGIDORA, COL. CENTRO, C.P. 76000 QUERETARO, QRO.

ESTADO DE QUINTANA ROO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. 22 DE ENERO S/N, COL. CENTRO, C.P. 77000 CHETUMAL, Q.ROO.

ESTADO DE SAN LUIS POTOSI, DELEGACION, FRANCISCO I. MADERO 455, ZONA CENTRO, C.P. 78000 SAN LUIS POTOSI, S.L.P.

ESTADO DE SINALOA, DELEGACION, INSURGENTES Y LAZARO GARDENAS, UNIDAD ADMINISTRATIVA, PALACIO DE GOBIERNO, C.P. 80000 CULIACAN, SIN.

ESTADO DE SONORA, DELEGACION, COMONFORT Y HORSFEER, COL. CENTENARIO, C.P. 83260 HERMOSILLO, SON.

ESTADO DE VILLAHERMOSA, DELEGACION, FRANCISCO I. MADERNO 1014,

EDIF. BANPAIS, P.B., COL. CENTRO, C.P. 86000 VILLAHERMOSA, TAB.

ESTADO DE TAMAULIPAS, DELEGACION, JUAREZ 904, ENTRE 8 Y 9, P.N.,

C.P. 87000 CD. VICTORIA, TAMAULIPAS.

ESTADO DE TOLUCA, DELEGACION, CALLE VICENTE VILLADA 114-1B,

COL. CENTRO, C.P. 83260 TOLUCA, EDO. DE MEXICO.

ESTADO DE MICHOACAN, DELEGACION, CALLE 20 DE NOVIEMBRE 351, COL. CENTRO, C.P. 58000 MORELIA, MICH.

ESTADO DE MORELOS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, JARDINES JUAREZ S/N, COL. CENTRO, C.P. 62009 CUERNAVACA, MOR.

ESTADO DE NAYARIT, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. MEXICO Y ABASOLO, COL. CENTRO, C.P. 63000 TEPIC, NAYARIT.

ESTADO DE NUEVO LEON, DELEGACION, AV. LOMA REDONDA 2702, PISO 1°, COL. LOMAS DE SAN FRANCISCO, C.P. 64710 MONTERREY, N.L.

ESTADO OAXACA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, BUSTAMANTE S/N, PLANTA ALTA, COL. CENTRO, C.P. 68000 OAXACA, OAX.

ESTADO DE PUEBLA, SECRETARIA DE GOBERNACION, PALACIO DE GOBIERNO,

AV. REFORMA 711, COL. CENTRO, C.P. 72000 PUEBLA, PUE.

ESTADO DE QUERETARO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PASTEUR Y CORREGIDORA, COL. CENTRO, C.P. 76000 QUERETARO, QRO.

ESTADO DE QUINTANA ROO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. 22 DE ENERO S/N, COL. CENTRO, C.P. 77000 CHETUMAL, Q.ROO.

ESTADO DE SAN LUIS POTOSI, DELEGACION, FRANCISCO I. MADERO 455,

ZONA CENTRO, C.P. 78000 SAN LUIS POTOSI, S.L.P.

ESTADO DE SINALOA, DELEGACION, INSURGENTES Y LAZARO CARDENAS, UNIDAD ADMINISTRATIVA, PALACIO DE GOBIERNO, C.P. 80000 CULIACAN, SIN.

ESTADO DE SONORA, DELEGACION, COMONFORT Y HORSFEER, COL. CENTENARIO, C.P. 83260 HERMOSILLO, SON.

ESTADO DE VILLAHERMOSA, DELEGACION, FRANCISCO I. MADERO 1014, EDIF. BANPAIS, P.B., COL. CENTRO, C.P. 86000 VILLAHERMOSA, TAB.

ESTADO DE TAMAULIPAS, DELEGACION, JUAREZ 904, ENTRE 8 Y 9, P.N., C.P. 87000 CD. VICT0RIA, TAMAULIPAS.

ESTADO DE TLAXCALA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PLAZA DE LA CONSTITUCION N°3, COL. CENTRO, C.P. 90000 TLAXCALA, TLAX.

ESTADO DE VERACRUZ, DELEGACION, AV. CAMACHO 245, FRACCIONAMIENTO VERACRUZ, C.P. 91030 JALAPA, VER.

ESTADO DE YUCATAN, DELEGACION, COLON 501, EDIF. 8, ESQ. CALLE 60, P.B., C.P. 90070 MERIDA, YUC.

ESTADO DE ZACATECAS, DELEGACION, FERNANDO VILLALPANDO 206, C.P. 98000 ZACATECAS, ZAC.

DISTRITO FEDERAL, DELEGACION CUANHTEMOC, ALDAMA Y MINA, COL. GUERRERO, C.P. 06350 MEXICO, D.F.

SECRETARIA DE GOBERNACION, INSTITUTO NACIONAL DE MIGRACION,

AV. CHAPULTEPEC 284, COL. ROMA, C.P. 06700 MEXICO, D.F.

Legalization of documents of the Mexican states:

ESTADO DE AGUASCALIENTES, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PLAZA DE LA PATRIA, ZONA CENTRO, C.P. 20000 AGUASCALIENTES, AGS.

ESTADO DE BAJA CALIFORNIA, SECRETARIA GENERAL DE GOBIERNO, EDIFICIO PODER EJECUTIVO, 3°PISO, CALZ. INDEPENDENCIA Y HEROES, C.P. 21000 MEXICALI, B.C.

ESTADO DE BAJA CALIFORNIA SUR, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, ISABEL LA CATOLICA ENTRE BRAVO Y ROSALES, 1°PISO, C.P. 24000 LA PAZ, B.C.

ESTADO DE CAMPECHE, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE LOS PODERES, 4°PISO, CALLE N°8 S/N, COL. CENTRO, C.P. 24000 CAMPECHE, CAMP.

ESTADO DE COAHUILA, PALACIO DE GOBIERNO, 2°PISO, PLAZA DE LAS ARMAS ENTRE CALLE ALLENDE Y CALLE JUAREZ, CENTRO, C.P. 25008 COAHUILA, SALTILLO MEXICO.

ESTADO DE COLIMA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, CALLE REFORMA E HIDALGO, COL. CENTRO, C.P. 28000 COLIMA, COL.

ESTADO DE CHIAPAS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, 2°PISO, AV. CENTRAL Y 1°DE ORIENTE, COL. CENTRO,

C.P. 29000 TUXTLA GTZ. CHIS.

ESTADO DE CHIHUAHUA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO 1°PISO, ALDAMA Y VENUSTIANO CARRANZA, COL. CENTRO,

C.P. 31000 CHIHUAHUA, CHIH.

ESTADO DE DURANGO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO S/N, CALLE 5 DE FEBRERO, COL. CENTRO, C.P. 34000 DURANGO, DGO.

ESTADO DE GUANAJUATO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PASEO DE LA PRESA N°103, 1°PISO, C.P. 36000 GUANAJUATO, GTO.

ESTADO DE GUERRERO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. MIGUEL ALEMAN N°1, COL. CENTRO, C.P. 39009, CHILPANCINGO, GRO.

ESTADO DE HIDALGO, SECRETARIA DE GOBIERNO, PALACIO DE GOBIERNO, PLAZA JUAREZ S/N, 2°PISO, COL. CENTRO, C.P. 42000 PACHUCA, HGO.

ESTADO DE JALISCO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, CORONA Y PEDRO MORENO, SECTOR CENTRO, C.P. 44100 GUADALAJARA, JAL.

ESTADO DE MEXICO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PRIMER PISO, PUERTA "A", N°222, COL. CENTRO, C.P. 50000 TOLUCA, EDO DE MEXICO.

ESTADO DE NUCHOACAN, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PRIMER PATIO, PLANTA ALTA, COLONIA CENTRO, C.P. 58000 MORELIA, MICH.

ESTADO DE MORELOS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, JARDINES JUAREZ, S/N COL. CENTRO, C.P. 62009 CUERNAVACA, MOR.

ESTADO DE NAYARIT, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. MEXICO Y ABASOLO, COL. CENTRO, C.P. 63000 TEPIC, NAY.

ESTADO DE NUEVO LEON, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, 2°PISO, ZARAGOZA Y 5 DE MAYO, CENTRO, C.P. 64000 MONTERREY, N.L.

ESTADO DE OAXACA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, BUSTAMANTE S/N, PLANTA ALTA, COL. CENTRO, C.P. 68000 OAXACA, OAX.

ESTADO DE PUEBLA, SECRETARIA DE GOBERNACION, PALACIO DE GOBIERNO, AV. REFORMA N°711, COL. CENTRO, C.P. 72000 PUEBLA, PUE.

ESTADO DE QUERETARO, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PASTEUR Y CORREGIDORA, COL. CENTRO, C.P. 76000 QUERETARO, QRO.

ESTADO DE QUINTANA ROO., SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. 22 DE ENERO S/N, COL. CENTRO, C.P. 77000 CHETUMAL, Q.ROO.

ESTADO DE SAN LUIS POTOSI, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, JARDIN HIDALGO S/N, COL. CENTRO, C.P. 78000 SAN LUIS POTOSI, S.L.P.

ESTADO DE SINALOA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO,INSURGENTES Y LAZARO CARDENAS, 3°PISO, COL. CENTRO,

C.P. 80000 CULIACAN, SIN.

ESTADO DE SONORA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, DR. PALIZA Y COMONFORT, CENTRO, C.P. 83260 HERMOSILLO, SON.

ESTADO DE TABASCO, SECRETARIA GENERAL DE GOBIERNO, ANEXO PALACIO DE GOBIERNO, 2°PISO, COL. CENTRO, C.P. 86000 VILLAHERMOSA, TAB.

ESTADO DE TAMAULIPAS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, 3°PISO, 15 Y 16, HIDALGO Y JUAREZ, ZONA CENTRO, C.P. 87000 CD. VICTORIA, TAMPS.

ESTADO DE TLAXCALA, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, PLAZA DE LA CONSTITUCION N°3, COL. CENTRO, C.P. 90000 TLAXCALA, TLAX.

ESTADO DE VERACRUZ, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, CALLE ENRIQUEZ S/N, COL. CENTRO, C.P. 91000 JAPALA, VER.

ESTADO DE YUCATAN, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, CALLE 61 Y 60 S/N, COL. CENTRO, C.P. 97000 MERIDA, YUC.

ESTADO DE ZACATECAS, SECRETARIA GENERAL DE GOBIERNO, PALACIO DE GOBIERNO, AV. MIGUEL HIDALGO N°602, COL. CENTRO, C.P. 98000 ZACATECAS, ZAC.

DISTRITO FEDERAL, DIRECCION GENERAL JURIDICA Y DE ESTUDIOS, LEGISLATIVOS DEL DEPARTAMENTO DEL DISTRITO FEDERAL, IZAZAGA 89, 8°PISO, COL. CENTRO C.P. 06080 MEXICO, D.F.

Citation: 1995 [Austrian] Bundesgesetzblatt, 198. Stück, number 604, 7 September 1995.

JURISDICTION

First Circuit finds lack of personal jurisdiction over Dutch company based on "fair play and substantial justice" doctrine but without "minimum contacts" analysis

A Dutch international distributor (Stork) bought machines from another Dutch company (Gerritse) in the Netherlands. Stork arranged to have Gerritse send one machine, which turned out to be defective, to a buyer in Massachusetts. A Gerritse employee later inspected it while he was visiting the United States.

In the ensuing action against Stork (presumably brought by an injured plaintiff), the district court dismissed Stork's third-party action for indemnification and contribution against Gerritse for lack of personal jurisdiction. In a per curiam opinion, the U.S. Court of Appeals for the First Circuit affirms.

The Court does not grapple with the "close call" question as to  whether the events gave Gerritse enough "minimum contacts" with Massachusetts to meet due process requirements. Instead, the Court bases its decision on the requirement that the assertion of extraterritorial jurisdiction be 'consistent with traditional notions of fair play and substantial justice.' The sole cause of action at issue against Gerritse is Stork's indemnity action. "The parties must reasonably have expected that any litigation between them would not take place in Massachusetts; indeed, their contract included a forum selection clause designating Holland as the locus of litigation. More important, Massachusetts' interest in the indemnification dispute are [sic] extremely limited, the compensation of its citizen not being at stake." [51] Based on Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 113-116 (1987), the Court finds that the lack of "fair play and substantial justice" rendered the assertion of jurisdiction over Gerritse unconstitutional.

The concurring judge argues, however, that a jurisdictional determination should not jettison the "minimum contact" analysis. To apply the "fair play and substantial justice" doctrine without any "minimum contacts" analysis "ignores established law and flies in the teeth of binding precedent." [52]

Citation: D'Almeida v. Stork Brabant B.V. v. Gerritse Projecten, 71 F.3d 50 (1st Cir. 1995).

SOVEREIGN IMMUNITY

In action against foreign state-owned insurance companies, Second Circuit holds that, notwithstanding McCarran-Ferguson Act, FSIA bars enforcement of state insurance statute requiring out-of-state parties to post security for payment of judgment

In 1986, Don W. Stephens, the Kentucky Commissioner of Insurance, became liquidator of the insolvent Delta America Re Insurance Company (Delta), a Kentucky reinsurance company with its headquarters in New York. His job was to recover balances allegedly due from other reinsurance companies known as retrocessionaires, several of whom claimed immunity under the Foreign Sovereign Immunities Act of 1976 (FSIA).

Stephens' suit against the companies ended up in the Southern District of New York. Once there, Stephens asked the Court to make the foreign defendants post security for payment of judgment under New York Insurance Law § 1213(c)(1). Having found (1) that the security requirement was an "attachment" banned under § 1609 of FSIA, and (2) that the McCarran-Ferguson Act of 1946 (MFA) (which committed regulation of the insurance industry primarily to the states in the absence of a specific "act of congress" to the contrary) did not block application of FSIA, the district court denied the motion and Stephens appealed.

The U.S. Court of Appeals for the Second Circuit affirms. The Court first agrees that the mandatory posting of security is equivalent to an invalid "attachment" of foreign sovereign assets not within the narrow FSIA exceptions found in 28 U.S.C. §§ 1610-1611. This reading narrows the issue to whether the MFA trumps FSIA's ban on such attachments. Finding in the negative, the Court makes two points. First it reads the text, legislative history and authoritative Supreme Court readings of FSIA as displacing all state or federal law on the subject of foreign state immunity.

Secondly, the Court notes that the MFA came into being at a time when international law generally accorded to foreign states an absolute immunity from suit. While our courts then upheld attachment of state assets as a method of obtaining quasi-in-rem jurisdiction, these rulings did not allow attachments to secure judgments. Though the Tate Letter of 1952 adopted the international trend toward a restrictive view of foreign state immunity and, in 1976, the FSIA consigned to the courts all determinations of the recognized commercial and other exceptions to immunity, "it was not an 'act of Congress' that superseded New York insurance law [under the MFA]. International law, accepted by federal common law, had already done that before the FSIA came into being. And the [MFA] did not by its terms or in its history purport to overturn any pre-existing international or common law." [1234]

Citation: Stephens v. Nat'l Distillers and Chemical Corp., 69 F.3d 1226 (2nd Cir. 1995). [See also Stephens v. American Int'l Ins. Co., 1995 Int'l Law Update 2 (November)].

New York District Court finds subject matter jurisdiction under FSIA in action against German Opera Company, but dismisses for forum non conveniens

The Bonn City Opera Company (the Company) through its General Manager offered Lauretta Bybee and her husband, opera singers living in New York City, a contract to perform in Germany. She accepted the offer but her husband declined. According to Bybee, the Company then reneged on her contract because of her husband's action. In May 1993, Bybee sued the Company in a New York federal court for breach of contract along with claims of misrepresentation and defamation. By the Fall, a court-appointed process server had served the Company and del Monaco in Germany pursuant to the Hague Service Convention of 1965 (HSC) [20 U.S.T. 361, T.I.A.S. 6638]. German counsel twice corresponded with the court but defendants neither retained local New York counsel nor answered the complaint. In June 1994, the district court entered a default judgment against defendants and scheduled a hearing on damages. The court later allowed Bybee to file an amended complaint specifically claiming $178,000 for contract breach and $10,000,000 on the other claims. Pursuant to court order, plaintiff had new process sent to defendants by Federal Express with German translations in April 1995. Defendants, through New York counsel, later appeared and moved to dismiss the complaint on three grounds.

First, the Court rejects defendants' challenge to subject matter jurisdiction under FSIA. Though Bybee admits that defendants constitute an "agency or instrumentality of a foreign state" within 28 U.S.C. § 1603((b), she claims that, in hiring her, defendants had engaged in "commercial activity" in the United States within the exception in § 1605(a)(2).

As to the second point on personal jurisdiction under the amended complaint, the general formula under FSIA is that subject matter jurisdiction plus proper service under § 1608(b) would create personal jurisdiction over defendants. Noting that Germany had opted out of mail service under HSC, the Court holds that plaintiff failed to serve the amended complaint under the Convention. Moreover, § 1608(b)(3) service "as directed by court order" does not help plaintiff for she failed to show that other listed modes of service were not possible.

Thirdly, since service of the original complaint did confer personal jurisdiction, the Court dismisses the suit on grounds of forum non conveniens. It determines that the balance of public and private interest factors so strongly favors litigation in the German courts as to outweigh plaintiff's choice of forum. Though the travel burdens on parties and witnesses appear roughly equal, the Court suggests that New York choice-of-law rules would probably require application of German law. Moreover, Germany has a strong interest in having its courts decide issues arising out of a contract drafted in Germany to perform with a German institution in Germany. The Court, however, requires that defendants waive any statute-of-limitations defense that might deny plaintiff a German forum.

Citation: Bybee v. Oper der Standt [sic] Bonn, 899 F.Supp. 1216 (S.D.N.Y. 1995).

TARIFFS

EU issues new tariff and statistical nomenclature

The EC Commission has issued a new goods nomenclature ("combined nomenclature," CN), to adapt to changes in the International Convention on the Harmonized Commodity Description and Coding System and the Protocol thereto, as well as the accession of Austria, Finland and Sweden. Even though the EC recently made changes to the CN [see 1995 Int'l L. Update 9 (December)], the Commission decided to issue a complete new CN, together with the corresponding autonomous and conventional rates of duty.

The re-issue of the CN is partly the result of a dispute between the U.S. and the EU over chemical tariffs following the enlargement of the EU with Austria, Finland and Sweden. An agreement between the U.S. and the EU was confirmed by President Bill Clinton at the recent Madrid summit.

The CN includes general rules of interpretation and rules concerning duties, as well as special provisions for goods such as ships, aircraft, and pharmaceutical products.

The Schedule of Customs Duties is arranged by Section, including:

 Mineral products

 Products of chemical or allied industries

 Machinery and mechanical appliances

 Optical, precision, and precision instruments

The new CN applies from January 1, 1996 on.

Citation: Commission Regulation (EC) No 3009/95 of 22 December 1995 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, 1995 Official Journal of the European Communities (L 319) 1, 30 December 1995.

TELECOMMUNICATIONS

FCC issues new rules for review of license applications of foreign-affiliated entities

The Federal Communications Commission (FCC) has issued a final rule regarding the market entry and regulation of foreign-affiliated entities (47 C.F.R. Part 63). It establishes a market-entry standard by which the FCC will review whether it is in the public interest to permit foreign investment in licenses of common carrier radio facilities. It also makes additional changes to the FCC's regulation of international common carriers. The rule outlines the new entry standard and the new definition of "affiliation."

In reviewing applications by a foreign carrier or its U.S. affiliate, the FCC will examine whether competitive opportunities exist for U.S. carriers in destination markets in which the foreign carrier has market power. Furthermore, the FCC will consider public interest factors in permitting indirect foreign investment to exceed the section 310(b)(4) benchmark.

The rules became effective on January 29, 1996.

Citation: 60 Federal Register 67332-01 (December 29, 1995).

TRADE

World Trade Organization agreement designed to increase access to government purchasing among major industrial nations including United States, Japan and European Union members has entered into force

January 1, 1996 marked the entry into force of a new government procurement agreement of the World Trade Organization (WTO). The new arrangement will function along with a similar pact worked out under the GATT in 1981. WTO officials estimate that the scope of the new agreement will improve access to governmental purchases totaling several hundreds of billions of dollars, about ten times the scope of the 1981 pact.

Including access to sub-national entities such as states, provinces, departments, prefectures, etc., the new agreement for the first time comprises services such as construction. In effect, parties to the agreement undertake to accord "national treatment" to firms from other parties.

So far Canada, the 15 members of the European Union, Israel, Japan, South Korea, Norway, Switzerland, and the United States have ratified this agreement, though nations can join even if not members of the WTO.

Citation: WTO agreement on government procurement, Int. Tr. Rep. (BNA) of Jan. 3, 1996 at page 11.

World Trade Organization rules against U.S. on gasoline refining regulations

On January 17, 1996, a panel of the World Trade Organization ruled that certain regulations of the U.S. Environmental Protection Agency violate global trade rules by setting higher environmental standards for imported gasoline than for gasoline refined domestically.

The ruling, based on a complaint brought by Venezuela and Brazil, has been widely critized in the U.S. even though it has not yet been published.  The Panel Report is still "restricted," and a date for publication has not yet been set.

TRADEMARKS

European Union issues implementing regulation on Community Trade Mark based on single application

Beginning in April, the EU will have a new trade mark system that provides EU-wide protection with a single application (see 1996 Int'l Law Update 11). The Commission has adopted an implementing regulation for the Community trade mark (CTM).

The implementing regulation concerns, for example:

The required content of an application for a CTM.

The common classification, which will be based on Article 1 of the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of Registration of Marks of 15 June 1957, as revised and amended.

Claiming priority and seniority of a national trade mark.

Contents of the notice of opposition.

Registration of licenses and other rights.

Procedural rules of the trademark office.

The regulation entered into force on December 22, 1995.

Citation: Commission Regulation (EC) No 2868/95 of 13 December 1995 ..., 1995 Official Journal of the European Communities (L 303) 1, 15 December 1995.

Europe's new currency: Regarding the EU's plans for economic and monetary union envisioned by the 1992 Maastricht Treaty, the European Council in Madrid (December 15-16) decided that the new currency will be named the "euro."  It will lock the exchange rates among the participating currencies beginning January 1999, and is expected to become legal tender by the year 2002. Citation: Euro Memo, European Commission Delegation Washington, D.C., Fall/Winter 1995; European Union News, December 18, 1995, No. 80/95.

Human rights in China: The Chinese Information Office of the State Council published a whitepaper on "Human Rights Progress in China," which presents the official view on human rights. Citation: Newsletter Embassy of the People's Republic of China, No. 25, December 28, 1995.

EU-Canada fisheries agreement: After the fisheries conflict between the EU and Canada [see 1995 Int'l Law Update 5 (October)], the two parties reached an agreement on Greenland halibut in the context of the NAFO Convention. The EU published the agreement of April 1995, as well as the Exchange of Letters and Notes. Citation: 1995 Official Journal of the European Communities (L 308) 79, 21 December 1995.

EU-Russian trade agreement: The EU and Russia concluded an Interim Agreement on trade and trade-related matters, which will enter into force on 1 February 1996. The agreement concerns, for example, the trade in goods and nuclear materials, intellectual property rights, and customs. Citation: 1995 Official Journal of the European Communities (L 247) 1, 13 October 1995, and (L 316) 44, 30 December 1995.

Foreign tax credit in the U.S.: The IRS issued final regulations regarding the limitation on the amount of foreign tax credit under the Internal Revenue Code § 904(i). The regulations will "affect the source and foreign tax credit separate limitation character of income for calculating the foreign tax credit by certain related domestic corporations." They serve to prevent avoidance of foreign tax credit limitations. Citation: 60 Federal Register 56117-02 (November 7, 1995).

U.S. Direct investment abroad: The Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce has revised the reporting requirements for the mandatory survey of U.S. direct investment abroad (form BE-11). The revisions raise the overall exemption level for the mandatory survey, the exemption level for reporting individual non-bank foreign affiliates (forms BE-11B(LF) and BE-11C), and institute a short form (BR-11B(SF)) for U.S. companies to report their majority-owned non-bank foreign affiliates with assets, sales, and net income of $20 - $50 million. Citation: 60 Federal Register 54590 (October 25, 1995).