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 9 (September).

CRIMINAL LAW

In criminal appeals case, the High Court of the Hong Kong Special Administration Region holds that common law of conspiracy survived transition to Chinese rule

In the following case, the High Court of Hong Kong, Court of Appeal, refuses to reverse the convictions of three defendants because of the political changes that have occurred in Hong Kong.

The three defendants had allegedly bribed someone to give favorable testimony regarding one of the defendant's involvement in a robbery. In August of 1995, authorities charged them with "conspiracy to pervert the course of public justice, contrary to common law." After a preliminary inquiry by the then High Court in December of 1996, an indictment came down in January 1997 and the trial began on June 16, 1997. Three days later, the government filed an amended indictment which the defendants moved to quash. [On July 1, 1997, Hong Kong reverted to China.]

In a decision issued on July 29, 1997, the Hong Kong Court finds (1) that the common law offense of conspiracy to pervert the court of public justice is part of the law of the Hong Kong Special Administrative Region (HKSAR), and (2) that the Hong Courts can try the defendants based on the indictment issued before Hong Kong's reversion to China. In the appellate court’s view, the common law has in fact survived the transition. The new Hong Kong Basic Law (promulgated in 1990 and in effect since July 1, 1997) provided that the new governing authority must automatically adopt the laws previously in force in Hong Kong, including the common law (see Article 160). Thus, no further specific act by the Chinese National People's Congress (NPC) is necessary to render them effective in the new political system.

The Basic Law reflects the 1984 Joint Declaration of China and the United Kingdom to preserve Hong Kong's social, economic and legal system for the next 50 years to ensure stability and prosperity. Continuity after the change of sovereignty is therefore of vital importance. Therefore, the indictment in these defendants survived the change in sovereignty.

The two other judges concur in the disposition but issued separate statements.

Citation:  High Court of the Hong Kong Special Administrative Region, Court of Appeal, Reservation of Question of Law No. 1 of 1997 between HKSAR and Ma Wai-Kwan (July 29, 1997).

EXTRADITION

After analysis of U.S.-Honduras Extradition Treaty and supporting evidentiary documents, Supreme Court of Honduras rejects U.S. request for extradition of ex-Haitian police chief based on lack of evidence

In the August 1997 issue, International Law Update reported that Honduras had just rejected the U.S. request to extradite Colonel Joseph Michel François, a former Haitian Chief of Police. A leader in the 1991 coup against former Haitian President Jean-Bertrand Aristide, he was a key member in the 1991-1994 military government that later resigned under U.S. pressure. Update has now received the full opinion of the Supreme Court of Honduras.

The Honduran district court had denied the U.S. extradition request mainly because the U.S. had failed to timely present supporting evidence that François had committed the charged drug crimes. These included sending 25 kilograms cocaine on the vessel Saint Philemene in September of 1993, handing 500 grams of cocaine to a DEA Agent in Nassau, Bahamas in June of 1994, and possessing approximately 25 kilograms of heroin for sale in the U.S. in 1994. The district judge had set a two-month deadline from François' arrest. It passed without the U.S. having tendered such evidence.

On July 22, 1997, in a 5-4 decision, the Honduran Supreme Court affirms. The Court agrees that the U.S. had failed to present competent evidence to show that François had committed the charged acts. Such a request based on drug charges turns on (1) the U.S.-Honduras Extradition Treaty [37 Stat. 1616, T.S. No. 569, 8 Bevans 892], (2) its additional Protocol. Under Article 1 of the Extradition Treaty, the parties will grant extradition only if the evidence is legally sufficient under the standards of the party where the extraditee is found [slip op. 32].

The affidavit of John S. Kastrenakes, the U.S. prosecutor, was the key item of evidence. After he had reviewed documents of the DEA, the Customs Service, and other government organizations, including a declaration by Special Agent Gary Coffman, Kastrenakes concluded that the evidence indicated François' culpability. The Court notes, however, that the statements of Kastrenakes and Coffman emphasize that "the evidence will show that ..." François engaged in certain conduct, not that there is any evidence currently available that "shows" those facts. [slip op. 25]  Statements like these that rest on circumstantial facts are not enough under Honduran law to warrant extradition.

Moreover, in the Court's view, the U.S. documents had failed to show that François was subject to U.S. jurisdiction when he had carried out the alleged acts as Article 11 of the Extradition Treaty demands.

Finally, François' had claimed that the U.N. Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances [28 I.L.M. 493 (1989)] also applied in determining whether drug offenses are extraditable offenses. The Court disagrees, pointing out that the Convention must be interpreted in light of the extradition treaties (slip op. 32).  Therefore, the U.N. Convention does not apply in determining whether he has committed a criminal drug offense.

Citation:  Corte Supreme de Justicia. - Tegucigalpa, M.D.C., decision of July 22, 1997 in the matter of Joseph Michel François, file number "Apelación Penal No. 721=97" (certified on July 24, 1997).

EXTRADITION

In extradition proceedings brought by Romania, Nova Scotia Supreme Court upholds release of seven Taiwanese crew members charged with putting three Romanian stowaways overboard on high seas since alleged offenses not committed within Romanian jurisdiction

In accordance with its bilateral treaty with Canada, Romania petitioned Canadian authorities to extradite seven Taiwanese crew members of the containership "Maersk Dubai."  Romanian authorities had charged them with murdering three Romanian stowaways. During a March 1996 voyage from Spain to Halifax, the crew had taken two Romanians and had allegedly set them adrift on a makeshift raft in rough seas 30-50 miles west of the Portuguese coast.

During a similar voyage in from Spain to Halifax in May 1996, the crew simply tossed another Romanian stowaway over the side about 300 miles from land. Friends and relatives have not seen or heard from any of the victims since their ill-fated voyage on the "Maersk Dubai."

On May 29, 1996, at the port of Halifax, authorities arrested seven crew members. At their extradition hearing, the judge heard other Romanian stowaways, and several Filipino crew members testify as to the above incidents. Expert witnesses then opined as to the slim chances of the victims' survival at sea under the circumstances and as to the location of the ship at the time of the expulsions. Expressing an interest in prosecuting the detainees, the Republic of China (Taiwan) intervened and presented an expert on international law.

The detainees' claimed that the Canadian court lacked jurisdiction to extradite. The 1893 Treaty between Canada and Romania and the Canadian Extradition Act require that the extraditee must be a fugitive from offenses committed within Romanian jurisdiction. The court of first instance discharged the prisoners and the Romanian government appealed.

The Supreme Court of Nova Scotia dismisses the appeal. Under settled rules of international law, the receiving nation has no duty to send accused criminals back to the situs of their crimes except pursuant to an extradition treaty between the demanding and the receiving states. The Court stresses the judicial tendency in Canada and elsewhere to read these treaties and their implementing statutes strictly and to define "jurisdiction" as referring only to the territorial or geographic jurisdiction of the demanding state.

Here, detainees committed their alleged offenses on the high seas and clearly outside the territorial jurisdiction of Romania. Hence, though there was sufficient circumstantial evidence and testimony, if believed, to show some degree of murder or manslaughter as to all detainees, the Canadian court lacked power to order their extradition to Romania.

Citation: State of Romania v. Cheng, 114 C.C.C.3d 289 (N.S.S.C. 1997).

HUMAN RIGHTS

European Court of Human Rights rules that German Constitutional Court violated “reasonable time” requirements of European Human Rights Convention when it took over five years to rule on referred questions in actions over property rights

In May 1980, applicant, a Mr. Pammel from Hannover, Germany, sued the town of Höxter and an allotment garden association (Kleingartenverein) to regain possession of a certain plot of land. Mr. Pammel had inherited the land from his father who had apparently leased it to the town council in 1949. In November of that year, the Paderborn Regional Court granted Pammel partial relief by ordering the land returned as of March 1987.

Defendants appealed to the Hamm Court of Appeal. In May 1987, that court suspended the proceedings so that it could refer questions to the Federal Constitutional Court (Bundesverfassungsgericht or BVG). The question was whether certain provisions of the Federal Allotment Act were compatible with the Basic Law. Since the Federal Court of Justice (Bundesgerichtshof) had referred the same question two years before, the BVG joined the cases. After receiving input from various governmental and private entities, the BVG handed down its ruling in September 1992. On a point the court itself had raised, it found that the Act clashed with the Basic Law.

In August 1990, Mr. Pammel applied to the European Commission on Human Rights. It declared the application admissible in January 1995. Failing a friendly settlement, the Commission unanimously reported that the BVG had breached Article 6, § 1 of the European Convention on Human Rights [European Convention for the Protection of Human Rights and Fundamental Freedoms, Sept. 3, 1953, Europ. T.S. No. 5, 213 U.N.T.S. 221]. Mr. Pammel then referred his case to the Human Rights Court in March 1996.

In July 1997, the Court unanimously rules (1) that Article 6, § 1 of the Convention did apply to the BVG and (2) that the BVG had breached that provision because the great length of its proceedings exceeded a "reasonable time."

First, it was the Court's view that Article 6, § 1 applied even to proceedings before a constitutional court, if their outcome was decisive for civil rights and obligations. Mr. Pammel's case in the lower German courts dealt with his right of property -- clearly a civil right within Article 6. The Hamm Court of Appeal had to wait over five years before it could hand down its judgment defining Mr. Pammel's property rights.

On the second point, the Court considered the complexity of the case, the role of the applicant and the conduct of the BVG. The case was indeed complex and of legal difficulty with implications beyond the scope of the two joined cases. Applicant, however, had admittedly not been chargeable for any of the delay in the BVG. As to the BVG, the fact that it had been laboring under a perennial overload since the 1970's did not justify the unreasonable length of the proceedings. Moreover, the identical issue had been before the BVG since May 1985 in the companion case.

Invoking Article 50 of the Convention, the European Court awarded Mr. Pammel, DM 15,000 in damages and DM 10,000 for costs and expenses.

Citation: Pammel v. Germany, Case 418, Eur. Ct. Hum. Rts., [July 1, 1997].

JUDICIAL ASSISTANCE

In suit over fatal boating accident, Tasmanian Supreme Court upholds lower court order appointing local judge to take testimony of plaintiffs and other witnesses in California

 In March 1991, at New Norfolk in the Australian province of Tasmania, William Priestley, a successful California insurance agent, was riding as a passenger on a jet boat manufactured by Tasmania Devil Jet when he received fatal injuries. The deceased’s family sued in the courts of Tasmania accusing the boat’s owners and operators of driving it negligently. In February 1997, at plaintiffs’ request, the trial judge appointed Mr. Justice Peter George Underwood to take the testimony of the plaintiffs and certain other witnesses in California subject to authorization of the proper American court. All but one of these witnesses were living or doing business in that state.

Defendants appealed the order to the Supreme Court of Tasmania on a number of grounds. They contended [1] that the trial court had failed to take into account plaintiffs’ choice of forum here and [2] the potential for prejudice to defendants because of inability of Justice Underwood to compel testimony or the production of documents in California. They also objected because [3] the trial court had improperly exercised his discretion under the controlling Tasmanian statute and [4] had not given enough weight to defendants’ offer to pay the travel and subsistence expenses of the nonparty witnesses so that they could testify in the Tasmanian court. Finally, defendants claimed [5] that the lower court had erred in concluding that it would be possible to obtain orders from a U.S. District Court under 28 U.S.C. s 1782 that would authorize a judge of the Tasmanian court to take testimony in California.

The Supreme Court of Tasmania dismisses the appeal. On issue [2], defendants relied upon various provisions of the Hague Evidence Convention which had entered into force between the U. S. and Australia on December 22, 1992. In their view, Mr. Justice Underwood could not carry out his duties under Section 158 of the Evidence Act unless U.S. law also authorized him to do so. Citing 28 U.S.C. s. 1782, however, the Supreme Court holds that the Convention does not limit the capacity of its members unilaterally to honor foreign requests for evidence-taking. The appellate court sees no clash between Sections 158 and 1782 as to the appointment of a “person” to take evidence. Whether Section 1782 authorizes a non-citizen or nonresident to take evidence in California is up to the appropriate U.S. district court. Moreover, if defendants need compulsory production of evidence, they are free to apply to a U.S. court. The Supreme Court rejects defendants’ points 1, 2, 3 and 5.

Finally, the lower court here did not abuse its discretion in ignoring the defendants’ offer to pay the expenses of witnesses to testify in Tasmania. This approach would not have solved all of the practical problems presented. The lower court had found that five witnesses were not willing to come to Tasmania but did not so find as to plaintiffs. The court did not abuse its discretion, however, in concluding that the balance of convenience favored taking evidence not only from the unwilling witnesses but also from plaintiffs.

The Court also notes that meanwhile the U.S. District Court has in fact appointed Mr. Justice Underwood to take evidence under section 1782 but without compulsion. Its terms, however, do allow for a later application to compel testimony if necessary. The Court looks upon the action of the American court as reinforcing its approval of the lower court’s order.

Citation: Harwood v. Priestley, FCA 10, Sup. Ct. Tas. (March 13, 1997).

JUDICIAL ASSISTANCE

In request for discovery under 28 U.S.C. § 1782 for use in German labor court proceeding, Second Circuit grants discovery request even though (1) the evidence might not be discoverable under German proceedings and (2) might surface in course of subsequent German court proceeding

Metallgesellschaft AG ("MG") is a German company that is seeking to compel discovery from Siegfried Hodapp, a former president of an MG subsidiary and New York resident, pursuant to 28 U.S.C. § 1782(a).  Hodapp is currently suing MG in labor court (Arbeitsgericht) in Germany, seeking remuneration for the 18 months after his dismissal.  In the German proceeding, MG is arguing that Hodapp is not entitled to such benefits because he worked for a competitor during that period.  Therefore, MG sought discovery in the U.S. to substantiate its defense.  The district court granted MG's application, but Hodapp refused to testify or produce documents at his deposition, claiming a privilege under German law.  After reconsideration of the issue, the district (1) vacated its formerly-issued subpoena because the discovery should be done before the German tribunal, and (2) found that this information would not be available in a German proceeding.  MG appeals.

The U.S. Court of Appeals for the Second Circuit agrees with MG that the district court should permit discovery.  Under 28 U.S.C. §1782(a), a district court with jurisdiction over a person may order him to give evidence for use in a foreign proceeding.  Once the statutory requirements are met (which is the case here), the district court may grant discovery in its discretion.  The Second has held that the aims of the statute are to (1) provide efficient means of assistance to participants in international litigation in U.S. federal courts, and (2) encourage foreign countries by example to provide similar means of assistance to U.S. courts.  Here, the district court did not consider these aspects.

"We have rejected any requirement that evidence sought in the United States pursuant to § 1782(a) be discoverable under the laws of the foreign country that is the locus of the underlying proceeding. ... [The prior holding] rests on the text of §1782, which 'makes no reference whatsoever to a requirement of discoverability under laws of the foreign jurisdiction,' ... as well as the history and purpose of the provision... Similarly, we have held that a district court may not refuse a request for discovery pursuant § 1782 because a foreign tribunal has not yet had the opportunity to consider the discovery request. ... Such a 'quasi-exhaustion requirement,' finds no support in the plain language of the statute and runs counter to its express purposes, as 'it would undermine the policy of improving procedures for assistance to foreign and international tribunals by imposing an addition burden on persons seeking assistance from our federal courts....'" [slip op. 6]

If discovery is sought for use in a foreign proceeding, and the district court is concerned about altering the balance created under foreign rules, the preferable solution is to narrowly tailor the discovery order.  Finally, even if Hodapp's testimony would be privileged under German discovery rules, he failed to produce "authoritative proof" that such a privilege exists and applies in the foreign proceeding.

Citation:  In Re: Application for an order permitting Metallgesellschaft AG to take discovery ...., No. 97-7479 (2d Cir. August 12, 1997).

JUDICIAL ASSISTANCE

In proceeding to secure evidence in New York for use in Spanish litigation between Spanish company and Kuwait Investment Authority, Second Circuit holds that, under 28 U.S.C § 1782, attorney-client privilege belongs only to holder of privilege though parties may have standing to challenge subpoena

Sarrio, S.A. sued the Kuwait Investment Authority (KIA) and some of its subsidiaries (jointly Grupo Torras) in Spanish court, alleging KIA's liability for unlawful acts of its subsidiaries. As part of the Spanish litigation, Sarrio sought documents from one of Grupo Torras' lenders, Chase Manhattan Bank (Chase) in New York City, pursuant to 28 U.S.C. § 1782.

Sarrio secured a subpoena to obtain relevant "documents from Chase located within the United States."  Chase Bank then requested some relevant documents from branch offices in England and Spain to have its attorney in New York review them in connection with the subpoena. Thereafter, Chase asserted the attorney-client privilege. KIA and Grupo Torras also obtained a protective order from the U.S. district court, denying discovery of the subpoenaed documents. When the court upheld this claim, Chase sent the documents back to the branch offices in England and Spain.

Since Chase declined to continue invoking the privilege on appeal, the U.S. Court of Appeals for the Second Circuit remands to determine whether Sarrio is entitled to disclosure of the requested documents. The basis for the original protective order is gone, in the Court's view, and so the district court must reconsider Sarrio's request for the documents.

In the Court's analysis, § 1782 presumably applies only to evidence located within the U.S. Otherwise the U.S. would become a "clearinghouse" for evidence to be used in foreign litigation. Here, Chase had sent the requested documents out of the U.S. Furthermore, even though § 1782 provides generally for production of documents for use in a foreign proceeding, the statute does not allow the court to compel an entity to give statements or produce documents in violation of its attorney-client privilege.

"The attorney-client privilege ... belongs solely to Chase. ... It can be asserted only by the client (or one authorized to do so on the client's behalf). ... That does not mean that standing to oppose subpoenas issued under 28 U.S.C. § 1782 is limited to the subpoenaed witness. We have recognized, though implicitly, that parties against whom the requested information will be used may have standing to challenge the lawfulness of discovery orders directed to third parties [under § 1782]" [13-14]  KIA and Grupo Torras, however, can no longer rely upon the attorney-client privilege that Chase, its owner, has surrendered.

Citation: In re: Application of Sarrio, S.A. for assistance before foreign tribunal, No. 95-9157 (2d Cir. July 15, 1997).

JURISDICTION

In contract action for negligent repair of vessel’s engine, Second Circuit reverses and remands for findings on whether clauses choosing Germany as forum for disputes actually formed part of contracts

New Moon Shipping Co. owned the vessel M/V ELECTRO-STAR. After an accident destroyed the crankshaft, New Moon went, In June 1992, to MAN & Co. B & W diesel AG (MAN), the manufacturer of the engine. In Hamburg, MAN set out to repair the starboard engine of the vessel M/V ELECTRO-STAR and, under four telexed agreements, to supply the necessary parts and a new crankshaft. It finished the job in September.

After only three weeks of operation at sea, however, the starboard engine failed, making the ship a total loss for ocean commerce. After having to scrap the ship, New Moon sued MAN in federal court for $5,000,000, alleging that it had negligently repaired the engine and had breached its warranty. The fourth contract involved nine telexes. MAN claims it mailed an order confirmation from Germany on July 2, 1992 and that it contained a clause selecting Augsburg as the forum for dispute resolution. New Moon’s agent, however, denied ever receiving the confirmation.

MAN moved to dismiss the federal proceeding for lack of subject matter jurisdiction. Relying upon choice-of-forum clauses, it argued that, more than three years of dealing between the agent and MAN made the latter familiar with the standard form basic conditions of repair contracts, one of which set Augsburg as the place to resolve disputes. New Moon argued in reply that MAN’s mere invitation to supply a copy of the standard conditions of their repair contracts does not make these unknown provisions binding. The district court decided that contracts (1) and (4) had incorporated the forum clause by reference and granted the motion to dismiss. New Moon filed an appeal.

The U.S. Court of Appeals for the Second Circuit reverses and remands for further proceedings. Preliminarily, the Court notes the confusion in the federal courts as to the proper procedure with which to invoke a forum selection clause. Choices have included requests for dismissal based on lack of subject matter jurisdiction, improper venue and even failure to state a claim. In any event, the Second Circuit analogizes the procedural situation to that of a plaintiff who has the burden of pleading and proving federal subject matter jurisdiction. Without a hearing, the district court must assume the truth of plaintiff’s allegations and can only derogate from those allegations after an evidentiary hearing.

The Court first addresses whether the forum clause actually formed a part of either contract (1) or (4). As to (1), the Court concludes that the lower court erred in finding that the agent had received the confirmation order without holding a hearing on the point. Next, the Court determines that the general reference to “terms and conditions known to you” in contract (4) was too ambiguous to incorporate the forum clause by reference.

The Court admits that, in general, a prior course of dealing between two parties may amount to notice and adoption of customary contract conditions setting forth forum clauses. The arrangements these parties entered into starting in 1990 were so complex and variable, however, that the Court was reluctant to affirm the binding nature of the choice of forum here. Another flaw was the lack of an evidentiary hearing to explore the disputed issue of whether New Moon’s agent actually got the confirmation order.

There are also unresolved issues as to contracts (2) and (3) where the unspecified “conditions” presumably referred to a choice of Hamburg as forum. Alternatively, New Moon had argued that, even if the forum clauses did form a part of the several contracts, the clauses failed to meet the reasonableness test of The Bremen v. Zapata Off-shore Co., 407 U.S. 1 (1972). One aspect of this test is whether remitting New Moon to a German forum would be so burdensome and inconvenient as to deprive New Moon of its day in court.

New Moon argued that a German statute of limitations may bar its action in the German courts. Declining to rule on this issue of first impression, the Court notes that the lower court need not reach it either unless it determines the extent, if any, to which the forum clauses were legally part of the contracts.  It also leaves it to the district court to determine whether any of the forum clauses might apply to the tort-based claims that arise in connection with the contract causes of action.

Citation: New Moon Shipping Co., Ltd. v. Man B & W Diesel AG, No. 96-7289 (2nd Cir. June 16, 1997).

SOVEREIGN IMMUNITY

District of Columbia Circuit rules that sovereign immunity did not apply to Sheikh of Abu Dhabi in suit for breach of secret agreement to pay for medical care of American girl he had negligently injured in Abu Dhabi boating collision

Sixteen-year-old Tara Ann Jungquist was living with her parents who were U.S. citizens working in Abu Dhabi, an autonomous emirate. In May 1993, Sheikh Sultan, son of the Crown Prince of Abu Dhabi, organized a boating party and invited Tara. During the festivities, the Sheikh and a guest became drunk and negligently caused the collision of two motorboats. The impact threw Tara into the water. When she came up under the propeller, it penetrated her skull, causing serious brain damage.

The Sheikh admitted fault and secretly agreed that he would have the Abu Dhabi government pay the expenses of her medical treatment locally as well as in Germany and the U.S. Between September 1993 and January 1994, Tara was getting treatment in Abu Dhabi. Simultaneously, the government was telling her parents to leave the country and was allegedly harassing them in various ways. As late as March 1994, the Sultan kept up his acknowledgments of responsibility and his assurances that he would pay for Tara's expenses. After the American doctors reported that Tara would require indefinite care for her brain injuries, however, all payments stopped.

Tara and her parents then brought a diversity action against Sheikh Sultan and seven other defendants in District of Columbia federal court. Defendants included the government and several officials involved in dealing with Tara's treatments. They alleged conspiracy, fraud, negligence and contract claims. Plaintiffs also admitted that they had cooperated in keeping the Sheikh's role in the accident a secret. The complaint also alleged that, under Islamic law, authorities may confine a person who inflicts injury on another for as long as the victim's treatment lasts. It also claimed that the Sheikh's father threatened his son with "a walk in the desert," i.e., death, if he were responsible for Tara's accident.

Defendants moved to dismiss for lack of subject matter jurisdiction under the FSIA and on grounds of forum non conveniens. The court denied the latter motion but did dismiss five defendants on immunity grounds. The undismissed defendants took an interlocutory appeal.

The U.S. Court of Appeals for the District of Columbia Circuit reverses for lack of personal jurisdiction. The Court first points out that, if individual employees of a foreign government take an action while exercising official powers, they share in whatever immunity the state itself possesses,  Their underlying motives do not matter. The Court concludes that the whole arrangement was a corrupt bargain to keep the truth from coming out in exchange for payment of Tara's medical bills. The seriousness with which Islamic law and the Sheikh's father viewed accountability for Tara's injuries accounts for the cover-up scheme. Therefore, the Sheikh was acting in his private capacity and is not entitled to immunity.

On the other hand, both the Medical Attaché and the Director of Patient Relations were simply performing their official functions. Their jobs involved the administration of government medical programs for the citizens and residents of Abu Dhabi. The evidence fails to link them with the Sheikh's cover-up scheme. Nor did their specific dealings with Tara's treatment constitute "commercial activity" within § 1605(a)(2) of the FSIA.

Personal jurisdiction, however, does present a problem. The Sheikh and defendant Samea, his secretary, had never personally transacted business in the District of Columbia, nor had they committed specific overt acts of conspiracy there. Thus, there were not enough contacts to satisfy the Due Process Clause.

In addition, plaintiffs cannot rely upon alleged conformity with D.C.'s long-arm statute. While the Medical Attaché and the Director did enter D.C. to carry out the Sheikh's agreement, these activities fell within their official duties. Neither the Sheikh nor Samea purposefully directed their efforts toward D.C. So neither could reasonably expect that plaintiffs would hale them into court there. Finally, neither defendant committed a tortious act in D.C. within the local statute since the boating accident took place in the Middle East.

Citation: Jungquist v. Sheikh Sultan Bin Khalifa al Nahyan, 325 U.S.App.D.C. 117, 115 F.3d 1020 (1997).

TELECOMMUNICATIONS

FCC publishes proposed rules on access of foreign entities to U.S. telecommunications market; EU claims proposed rules violate global agreement on telecom services

On June 4, 1997, the Federal Communications Commission issued proposed rules on foreign participation in the U.S. telecommunications market. The proposed rules would, for example, change the so-called "effective competitive opportunities" (ECO) test, which is used in reviewing applications from carriers from WTO Member States to provide international telecommunications services in the U.S. The purpose of the changes is to prepare for the WTO Agreement on basic telecommunication services, which will take effect on January 1, 1998. That agreement covers 95% of the global telecommunications services and will open domestic markets for foreign competitors.

The European Union (EU) has already criticized the proposed rules. In a statement issued by the Commission of the European Communities, the EU expressed its concerns that the rules do not comply with the WTO General Agreement on Trade in Services (GATS) in the following respects:

- The continuing use by the U.S. of broad or murky "public interest" factors such as "law enforcement," "foreign policy," or "trade" concerns in deciding on applications from foreign carriers;

- The use of the unclear concept of "very high risk to competition" for possible refusals of licenses; and

- The assumption that special safeguards are necessary for U.S. telecommunication carriers which are affiliated with foreign carriers that either have market power in destination countries, or do not have international facilities-based competition in the destination market.

The EU has indicated that it might bring a complaint before the WTO.

Citation:  62 Federal Register 32966 (June 17, 1997); European Union News press release No. 54/97 (August 5, 1997).

TRADE

German High Court rejects damage claims by Benetton dealers against Benetton clothing manufacturer for alleged damages suffered because of Benetton's “shock advertising”

Chamber VIII of the German High Court (Bundesgerichtshof, BGH), which handles commercial matters, has rejected a damage claim brought by distributors of Benetton products. In the early 90s, Benetton, an Italian clothing manufacturer, used "shock advertising" to promote its products. Under the heading "United Colors of Benetton," it used large photographs of scenes such as [1] a recently deceased AIDS victim surrounded by his grieving family, [2] an oil-polluted bird, and [3] child labor conditions. German courts, including the German High Court, later banned some of those advertisements as anti-competitive.

In the present case, several Benetton retailers claim damages for loss of revenue as a result of Benetton's advertising strategies. Under the arrangements between Benetton and its retailers, Benetton had the authority to make all advertising decisions. The retailers, however, argued that there were "protectable interests" (schutzwürdige Interessen) that Benetton should have considered in exercising its discretion.

The district court (Landgericht) in Kassel and the State Supreme Court (Oberlandesgericht) in Frankfurt am Main, denied two of these claims. The cases came before the German High Court in consolidated form.

On July 23, 1997, the German High Court issues a decision that agrees with the lower courts and denies damages. In the Court’s view, a special relationship exists between the manufacturer Benetton and the independently owned retail stores. Since the advertising decisions were solely in Benetton's hands, Benetton had to take account of the impact of the advertising on the retailers.

This does not mean, however, that Benetton could not resort to new and unusual advertising strategies. A free market economy must allow companies such as Benetton some discretion in making risky decisions. Also, Benetton had the same interest as its retailers in selling more Benetton products. Had the advertising been successful, both would have profited. Since Benetton's shock advertising had limited success, the retailers have themselves to blame for leaving all advertising decisions to Benetton. Also, Benetton stopped the advertising when the negative effects became obvious.

The German High Court, however, refuses to spell out the nature of the retailers’ "protectable economic interests" that would have restrained Benetton's advertising autonomy in this case.

Other courts have held that this kind of "shock advertising" is anti-competitive. This decision, however, does not contradict previous decisions, because in some cases "shock advertising" may actually lead to increased sales.

Citation: Bundesgerichtshof (BGH)(VIII. Zivilsenat), Urteil vom 23. Juli 1997 - VIII ZR 130/96, VIII 134/96.

TRADE

Text of EU-U.S. Mutual Recognition Agreement on acceptance of each other's product standards is now available

The EU has made the Agreement on Mutual Recognition between the United States of America and the European Community available. The EU and the U.S. signed the Agreement on June 20, 1997 [see 1997 Int'l L. Update 87]. The purpose is to facilitate mutual trade by accepting each other's product standards. In particular, this Agreement specifies the requirements for accepting results of conformity assessment procedures, produced by the other Party's conformity assessment bodies or authorities (Article 2).

The key sections of the Agreement include:

- Article 3: General Obligations. Both parties will, as specified in the Sectoral Annexes, accept or recognize results of specified procedures, used in assessing conformity to specified legislative, regulatory, and administrative provisions of the United States, produced by the other Party's conformity assessment bodies and/or authorities.

- Article 4: General Coverage of the Agreement. This Agreement applies to conformity assessment procedures for products and/or processes and to other related cooperative activities as described in this Agreement. Sectoral Annexes may include, for example: (i) a description of the relevant legislative, regulatory and administrative provisions pertaining to the conformity assessment procedures and technical regulations; (ii) a statement on the product scope and coverage; (iii) a list of Designating Authorities; (iv) a list of agreed conformity assessment bodies or authorities or a source from which to obtain a list of such bodies or authorities and a statement of the scope of the conformity assessment procedures for which each has been agreed; (v) the procedures and criteria for designating the conformity assessment bodies; (vi) a description of the mutual recognition obligations; and (vii) a sectoral transition arrangement.

- Sectoral Annexes on Telecommunications Equipment, Electromagnetic Compatibility, Electrical Safety, Recreational Craft, Pharmaceutical "Good Manufacturing Practice," and Medical Devices. The sectoral annexes set forth the procedures for recognizing products.

In addition, for the Sectoral Annexes that concern particular kinds of products, additional rules and requirements are in:

- Appendix 1: List of Applicable Laws, Regulations and Administrative Provisions. It names the laws, regulations and administrative provisions governing the inspections and other requirements.

- Appendix 4: Criteria for assessing Equivalence for Post‑Approval. It describes the  criteria to be used by the Parties to assess the equivalence of products.

The Agreement will enter into force on the first day of the second month after the parties have confirmed the national implementation. The parties are planning to negotiate additional annexes.

Citation:  The Agreement on Mutual Recognition between the United States of America and the European Community is available on the "Europa" internet server of the EU at http://europa.eu.int.

TRADE

- U.S. further restricts business deals with Iran. Based on the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701), President Bill Clinton has issued Executive Order 13059 of August 19, 1997. It generally bans (1) the import of Iranian goods or services, (2) the sale of technology or services to the Iranian government, and (3) investments by U.S. persons in Iran, or projects controlled by the government of Iran. Citation:  62 Federal Register 44531 (August 21, 1997).

TRADE

- Institute of Foreign Trade and other Indian organizations publish international trade report. Several Indian trade-related organizations, including the Institute of Foreign Trade and the India Trade Promotion Organisation, are promoting a fortnightly report on international trade, called "World Trade Scanner."  It covers not just Indian trade matters, but also worldwide trade under WTO rules. Citation: For inquiries, contact Mr. Arun Goyal at the Academy for Business Studies, New Delhi, Phone: (91)(11) 328-1314, FAX: (91)(11) 326-2880, E-mail: arung@giasdl01.vsnl.net.in