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 11 (November).

BANKING

To liberalize its financial markets, Japan amends Foreign Exchange and Foreign Trade Control Act

The Ministry of International Trade and Industry (MITI) announces that Japan has amended its Foreign Exchange and Foreign Trade Control Act (Gaikoku kawase oyobi gaikoku booeki kanri hoo). The Amendments seek to bring about the liberalization of Japan's financial markets.

The principal elements of the Amendment are the:

- Removal of restrictions on domestic and cross-border foreign exchange transactions. This entails doing away with the prior system that demanded "prior permission and notification" for foreign exchange transactions through other than authorized foreign exchange banks. For example, previous law required permission (i) to open a deposit account with overseas financial institutions to finance exports and imports, (ii) to make loans to or investments in, and to pay debts owed to overseas entities, (iii) to net claims and obligations with overseas entities in foreign currencies, and (iv) to trade in foreign currencies and to enter into futures contracts in foreign currencies.

- Complete liberalization of the foreign exchange business. The Amendment abrogates the system of "authorized foreign exchange banks" and the "money exchange system."  These date from a time when foreign currency was scarce.

- Creation of an "ex post facto" reporting system for domestic and overseas capital transactions. The Amendment introduces post-transaction reporting requirements for purposes such as compiling balance of payments statistics.

The effective date of the Amendment will be April 1, 1998.

Citation:  Gaikoku kawase oyobi gaikoku booeki kanri hoo no ichibu o kaisei suru hooritsu [Amendment to the Foreign Exchange and Foreign Trade Control Act] (No. 59), 1997 Kanpo [Japanese Official Gazette] (May 23, 1997), issue 102, page 1. [A brief English summary is available at MITI's internet site at http:/www.miti.go.jp/report-e/g314001e.html.]

CHOICE OF LAW

Singapore Court of Appeal upholds judgment against defendants for role in converting millions of dollars worth of jewelry belonging to New York company and others

   Ralph Esmerian, Inc. (Esmerian) and Rima Investors Corporation (Rima) consigned millions of dollars worth of jewelry to Corvina Securities Inc. (Corvina), who then consigned them to Wolfers Trading AG (Wolfers). Wolfers, in turn, consigned the jewelry, together with some of their own and some from Totah & Horowitz to a mercantile agent named Fakhreddin. The purpose of all of the consignments was to sell the jewelry to rich buyers in the Middle East. [See 1995 Int'l Law Update 7 (October)].

Wolfers turned the jewelry over to Fakhreddin in Geneva. Fakhreddin, however, embezzled the jewels and sold them to Diamond Center Pte. Ltd. (Diamond Center) in Singapore and to Teo, its director. When they found this out, Esmerian and Corvina filed three consolidated conversion suits against Fakhreddin, Diamond Center and Teo (defendants) in the Singapore courts.

   Defendants claimed that they had bought the recovered jewelry in good faith from Fakhreddin. They supposedly thought he was a mercantile agent in possession of them with the owners' consent. They also asserted that, under Swiss law, they had gotten good title to the jewelry.

   The trial judge ruled that defendants had not proved that they had bought the jewels in good faith. He found, inter alia, that defendants had procured the jewels at substantially undervalued prices and that Fakhreddin's invoices had many irregularities. In the judge's view, Teo was not a believable witness. He also held that, under Swiss law, good title had not passed to defendants.

Defendants appealed. The Court of Appeal of Singapore, however, dismisses the appeal. In the Court of Appeal's view, Swiss law had no application at all. The jewelry was physically in Singapore when Fakhreddin had sold them to Teo. Thus the lex situs was Singapore law.

  

The peculiar fact is that Fakhreddin marketed high‑priced goods in a place like Singapore where there is a limited market for them. There he sold them at a much lower price than he could have gotten elsewhere. In the Court's view, these suspicious circumstances would have put any prudent businessman on notice. It was inconceivable that Teo, who allegedly did a substantial quantity of jewelry business, would not have known that the prices commanded by such items in other more established markets would be much higher than what he paid for them. When he bought the jewelry at bargain-basement prices, he was at best taking a calculated business risk.

When a merchant consigns jewelry, laboratory certificates are not necessary. According to the expert evidence, however, when someone sells jewelry of this quality to retail customers, they would normally ask for laboratory certificates. Far from being a consignee, Teo was a buyer who in turn would sell to retail customers. Thus, there was good reason to ask for a certificate. Certificates, however, were presumably not important to Teo because of the bargain prices of the jewelry.

Furthermore, Teo got a copy of the laboratory certificate when he bought the Wolfers sapphire ring. According to the evidence, while the seller would show a copy of the laboratory certificate to a potential buyer, the seller customarily furnished the original upon purchase. According to Teo, he asked for the original certificate on the ring. Fakhreddin's failure to deliver the original surely should have put Teo on notice.

The defense of bona fide purchase from a mercantile agent under § 2(1) of the Factors Act was based entirely on Teo's evidence. On the facts, however, the trial judge was entitled to conclude that Teo was not a credible witness. His testimony was full of contradictions and he switched his ground often. The Court of Appeal concurs in the trial judge's findings.

Citation: Diamond Centre Pte. Ltd. v. R. Esmerian, Inc., 1996-3 S.L.R. 377 (Sing. Ct. App. 1996). [For additional background on the trial judge's ruling, see Singapore Straits Times, Sunday, Jan. 21, 1996].

CHOICE OF LAW

Where Vermont residents got into automobile accident in Quebec, Vermont Supreme Court applies its own negligence law rather than Quebec's no-fault scheme

In April 1994, Wade Miller and Steven White, both Vermont residents, plus a group of friends, decided to drive from Burlington, Vermont to the Frontier Bar in Quebec. White was driving his car which had a Vermont registry. While still in Canada and soon after leaving the bar, White drove off the side of the road. As a result, Miller suffered head injuries and fractured vertebrae. He filed a personal injury suit in Vermont court.

Plaintiff claimed that Vermont law should govern the action. It has retained a fault‑based compensation system for automobile negligence claims. Defendant, however, moved to dismiss claiming that Quebec's law of no-fault compensation applied. It also bars negligence actions for auto personal injuries.

With no factual dispute, both parties moved for summary judgment on the choice‑of‑law issue. The trial court applied the "most significant relationship" test from the Restatement (Second) of Conflict of Laws, and determined that Vermont law should control. It then denied defendant's motion.

Defendant then filed an interlocutory appeal where he argued that the trial court had erred in refusing to apply Quebec law. In an opinion by Justice Dooley, however, the Supreme Court of Vermont affirms.

The Court first points out that, earlier in 1997, the Court had adopted the "most significant relationship" test of the Restatement (Second) of Conflicts of Laws as to tort actions that involve other states or nations. [See Amiot v. Ames, 693 A.2d 675, 677 (Vermont, 1997)]. This appeal raises contending policies that allocate postevent losses. Both the Restatement (Second) and relevant precedents suggest that the common domicile of the parties is the most significant contact bearing on the choice of law.

Under Quebec's Automobile Insurance Act (Act), the Société de l'Assurance du Quebec (Société) compensates Quebec residents injured in automobile accidents on a no‑fault basis, regardless of where the accident occurred. Quebec law also sets caps upon various elements of damages. Finally, the Act did away with the right of an automobile accident victim to bring a personal injury claim in Quebec. As with other no‑fault systems, the Quebec Automobile Insurance Act seeks to speed up the recovery of damages by victims of automobile accidents, to reduce the number of tort cases in Quebec courts, and to assure comparatively low rates for automobile insurance.

Vermont, on the other hand, has kept the traditional tort system of recovery for automobile accidents. This approach tends to compensate victims at higher levels than no‑fault systems. In addition, it tries to magnify the level of risky activity in society, to lower the incidence and seriousness of injurious  events, and to produce comparatively clear norms of behavior.

As Justice Dooley declares: "Given its [tort] policies, we conclude that Quebec has little interest in the determination of whether its Automobile Insurance Act precludes the rights of action of a United States citizen against another United States citizen in an United States court. Pursuit of this claim will not raise insurance rates in Quebec nor hinder the administration of its courts. Quebec does not seek to deter negligent conduct by a fault‑based determination of liability. Indeed, Quebec may even prefer application of Vermont law to this case because the Société does not have to serve as an intermediary, paying benefits to plaintiff and collecting from defendant's insurance carrier." [slip op., 4] 

Quebec's choice‑of‑law rules also intimates its weak interest in this type of action. Where both tortfeasor and victim have their domiciles or residences in the same country, Quebec would say that the law of that country would ordinarily apply. On the other hand, the common domicile of the parties is strongly concerned with applying its law to this case. Plaintiff's domicile, for example, has a significant interest in assuring proper compensation to the victim. This is because the "social and economic repercussions of personal injury" will impact on plaintiff's domicile.

The needs of the international system also point to the law of the common domicile. In the international arena, it is usually acceptable to apply the laws of the domiciliary forum to tort claims that affect the residents of a single country, no matter where the tort took place. See Hague Convention on the Law Applicable to Traffic Accidents, Art. 4(a),(b) (1961).

Citation: Miller v. White, No. 96-310,  A.2d  (Vermont, August 8, 1997).

DEFENSE ISSUES

U.S. and Russian Federation sign START II Protocol designed to facilitate acceptance by Russian Parliament; jointly with other states, they amend ABM/TMD Agreements

On September 26, 1997, U.S. Secretary of State Madeleine K. Albright, on behalf of the U.S., and Russian Foreign Minister Yevgeniy Primakov, on behalf of the Russian Federation, signed a Protocol to the START II Treaty (Protocol on the Treaty Between the United States of America and the Russian Federation on Further Reductions and Limitations of Strategic Offensive Arms of January 3, 1993). For one thing, it enlarges the time period for completing all Treaty-mandated arms reductions under START II from January 1, 2003, until December 31, 2007. It also extends the date for carrying out the interim limitation and reductions of START II from December 5, 2001, until December 31, 2004.

The parties' Joint Agreed Statement allows for the downloading of Minuteman III ICBMs at any time before December 31, 2007. Under these conditions, the Parliament of the Russian Federation (Duma) will probably accept the START II Treaty and the costs of dismantling the nuclear weapons. [Note: START II was signed on January 3, 1993. The U.S. Senate gave its advice and consent on January 26, 1996]. The ratification of START II by the Russian Parliament should pave the way for a subsequent START III agreement.

Ms. Albright and Mr. Primakov also signed and exchanged letters implementing commitments made at the Helsinki Summit [Clinton-Yeltsin meeting March 20-21, 1997]. This already required the parties to demobilize their strategic nuclear delivery vehicles by December 31, 2003. Pursuant to START II, they would not have to get rid of them until December 31, 2007.

In a related matter, representatives of the U.S., the Russian Federation, Belarus, Kazakhstan, and the Ukraine have signed agreements to continue the 1972 Anti-Ballistic Missile (ABM) Treaty and theater ballistic missile defenses (TMD) agreement. These agreements aim to uphold the viability of the ABM Treaty as a basis for further strategic arms reductions. A Memorandum of Understanding signed by the U.S. with these four states of the former Soviet Union assures that all signatories will adhere to the ABM Treaty that was originally signed with the Soviet Union.

Additional agreements deal with lower-and-higher velocity TMD systems, Confidence-Building Measures, and the regulations of the Standing Consultative Commission (SCC) on these matters. The parties also initialed a Joint Statement setting up an annual exchange of information on the status of TMD plans and programs. These documents clarify the line between anti-ballistic missile (ABM) systems (limited by the Treaty), and TMD systems (not limited by the Treaty).

The START II Protocol, as well as the joint statements and other agreements are subject to ratification or other approval by the signatory states pursuant to their internal law.

Citation:  U.S. Department of State, START II Protocol (includes Press Releases, and Texts Signed September 26, 1997). [Also available from the U.S. Arms Control and Disarmament Agency in Washington, D.C., Phone: (202) 647-8677 (www.acda.gov).]

DEFENSE ISSUES

Japan and U.S. further develop defense guidelines to adapt them to post cold war conditions

On September 23, 1997, U.S. Secretary of State Madeleine K. Albright, Defense Secretary, William S. Cohen, Japanese Minister for Foreign Affairs, Keizo Obuchi, and Minister of Defense, Fumio Kyuma, announced new joint defense guidelines. These four officials form the so-called "U.S.-Japan Security Consultative Committee."  The parties adopted the guidelines after a Committee meeting in New York. Their purpose is to improve the U.S.-Japan security alliance and to adapt it to the post-Cold War world. They replace the 1978 guidelines that focused on possible military attacks on Japan. The new guidelines address instead possible conflicts in "areas surrounding Japan."

With the new guidelines, Japan may participate in military conflicts outside its borders along with the U.S. In particular, Japan will be able to:

- Provide mine sweepers for use in international waters,

- Conduct search and rescue missions in international waters with military vessels such as by enforcing U.N.-sanctioned embargoes by means of cargo inspections of foreign-registered vessels, and

- Assist with communications and surveillance in international waters and air space.

In addition, the agreements allow U.S. military forces to use Japanese civilian airports, harbors and hospitals. In compliance with Japan's constitutional prohibition against offensive military activities, the guidelines do not require Japanese forces to take part in military combat. Japan's support for U.S. forces, however, expressly excludes weapons and ammunition supplies, although Japan will transport such materials on behalf of the U.S. Japan continues to adhere to its "three non-nuclear principles" and will not permit nuclear weapons to be brought on Japanese soil.

The Committee plans to develop two bilateral programs based on the guidelines. The first will be for joint operations in case of an attack on Japan. The second will deal with mutual cooperation in case of an emergency in areas near Japan. The guidelines are subject to approval by the Japanese Parliament (Diet).

Citation:  The Joint Statement of the U.S.-Japan Security Consultative Committee is available at the internet site of the Japan Ministry of Foreign Affairs (MOFA), www.mofa.go.jp/security/ committee.html. [See also "U.S. Japan Expand Pact on Security," Washington Post, September 24, 1997, page 1].

EMPLOYMENT DISCRIMINATION

In employment dispute between U.S. ex-employee and Korean company, Seventh Circuit holds that under U.S.-Korea FCN Treaty, Korean company may favor Korean nationals over U.S. nationals

In 1991-1992, Harry Weeks, a U.S. citizen, was working as sales manager for Samsung Heavy Industries Co., Ltd. (SHI). Things did not go as well as Weeks had hoped. Eventually, Weeks filed an EEOC complaint. He charged that SHI was grooming a younger, less-qualified Korean, S.H. Lee, to assume the position for which the company had initially hired Weeks.

Weeks then resigned and, under Title VII of the Civil Rights Act, sued for Samsung's alleged discriminatory employment practices. The district court gave summary judgment to SHI.

The U.S. Court of Appeals for the Seventh Circuit affirms. Even if Weeks' allegations are true, the Treaty of Friendship, Commerce, and Navigation (FCN) between the U.S. and Korea [8 U.S.T. 2217, T.I.A.S. 3947] provides a valid defense for SHI. Article VIII(1) of that Treaty provides that "[n]ationals and companies of either Party shall be permitted to engage, within the territories of the other Party, accountants and other technical experts, executive personnel, attorneys, agents and other specialists of their choice." 

The sales manager position was an "executive" position under the Treaty. This provision, therefore, protects SHI's decision to replace Weeks, a U.S. citizen, with S.H. Lee, a Korean citizen, from claims of both disparate treatment and disparate impact under Title VII.

Citation:  Weeks v. Samsung Heavy Industries Co., Ltd., No. 96-2827 (7th Cir. September 26, 1997).

EUROPEAN UNION

EU adopts Treaty of Amsterdam to revamp institutional system and include former Eastern Bloc countries as additional members

On October 2, 1997, the foreign ministers of the 15 EU Member States, meeting in Amsterdam, signed a treaty for institutional reform and expansion. The Treaty of Amsterdam will, for example,

- Limit the Commission to 20 Commissioners (even though it does not determine how the Commissioners will be chosen once additional countries join the EU).

- Put a ceiling on membership in the European Parliament at 700.

- Establish social progress, environmental protection, and the elimination of discrimination as policy goals.

- Develop closer defense cooperation within the framework of the Western European Union (WEU) defense system.

- Redefine how the various EU institutions must interact (for example, the Secretary-General of the Council acts as the High Representative for the common foreign and security policy, who must coordinate with the Presidency who, in turn, must consult the European Parliament in such matters. See Article 1).

- Revise numerous technical provisions for the EU institutions and renumber the articles of the EU Treaty.

The Treaty does not, however, reassign financial burdens among the Members. According to some critics, these remain unevenly distributed.

Along with the Treaty, the Council issued various protocols and declarations, for example, on asylum, coherence between the EU and the Western European defense union. It also stressed such policy principles as subsidiarity and proportionality

The effective date of the Treaty depends on ratification by the Member States. It enters into force the first day of the second month following the month of deposit with the Italian Government of the last of the 15 instruments of ratification.

Citation: Treaty of Amsterdam amending the Treaty on European Union, the Treaties Establishing the European Communities and certain related Acts. The Treaty of Amsterdam is available at the internet site of the EU Council, http://ue.eu.int. [The competent body is the General Secretariat of the Council, Rue de la Loi 175, B-1048 Brussels, Belgium, Phone: (32)(2) 285-8446, FAX: (32)(2) 285-6361.]

EXTRADITION

Ninth Circuit declines to reverse finding of extraditability as to one accused of Mexican murder based on alleged mental incompetence

Mexico petitioned for the extradition of Aron Lopez‑Smith on murder charges. The preliminary showing indicates that Lopez-Smith bought a pistol in Arizona and then motored to Sonora, Mexico. Upon his arrival, he went up to two brothers in a night club and shot them. He then fled back to the United States. Authorities arrested him there, with the pistol still on or about his person.

Evidence before the magistrate established probable cause to believe that Lopez‑Smith had indeed committed the murders. Nevertheless, the judge let him make an offer of proof that he was mentally incompetent to stand trial. Based on history given by petitioner's mother, and his answers to a psychologist, it seemed likely that Lopez‑Smith had suffered from organic brain damage since he was born. This condition greatly impaired his ability to recall facts and to give accurate accounts of past events. Moreover, Lopez-Smith's ability to listen to and understand the legal proceedings against him was not of a high order.

The magistrate carefully considered his case and then issued a certificate of extraditability. Mexico had charged Lopez‑Smith with murder in Mexico and a Mexican court had issued an arrest warrant. Lopez‑Smith next petitioned for a writ of habeas corpus on several grounds. The first was that he was incompetent to undergo extradition proceedings because of mental deficiencies. Second, the magistrate judge had erred in refusing to consider evidence about whether the United States ought to exercise its discretion to extradite. Finally, the magistrate had ignored his evidence of official corruption relating to his case.

The district judge denied the writ, and petitioner filed an appeal. The U.S. Court of Appeals for the Ninth Circuit affirms.

Petitioner contended that refusal to consider his proof of incompetence denied him due process of law under the Fifth Amendment. The Court concedes that criminal trial of an incompetent defendant violates his constitutional right to due process of law. "This principle, though, does not apply to Lopez‑Smith, because if extradited he will not be subject to a criminal trial in the United States. His trial will be in Mexico. That sovereign nation has its own constitution and is not bound by ours." [1324]

The Supreme Court has ruled as far back as 1913 that insanity not only in the sense in which it has to do with guilt but also incompetence to stand trial were irrelevant to extradition. Most federal courts have kept on adhering to the principle that only the jurisdiction that tries a person on the merits has to deal with the incompetency issue.

Despite this, petitioner has raised serious issues. "It is conceivable that in some circumstances, a mentally competent accused might be able to help his attorney prevent certification of extraditability, while an incompetent accused could not. But the logic breaks down when we try to determine what would be done with a person determined to be incompetent. It would not make sense to commit him until he was fit to stand trial, because the United States would never try him. Nor would it make sense to hospitalize him in the United States until his release would no longer create a substantial risk of injury to persons to damage to property, because that would entirely ignore the right of another country to try him. ... Nor is it clear that incompetence to assist in one's defense, important in an adversarial system of criminal justice, matters as much in the inquisitorial system one ordinarily finds in non‑English speaking countries." [1325]

The Court also notes that the U.S. treaty with Mexico provides for discretionary, not mandatory, extradition. Likewise, 18 U.S.C. § 3186 says that the Secretary of State "may" order the person to be delivered to an agent of the foreign government to be tried. Petitioner argues that because the executive branch has to make a discretionary decision, the Due Process Clause guarantees him a chance to present the equities in his favor. These consist of his borderline mental state and the alleged bribe suggested by Sonoran police to drop charges against petitioner.

The Court disagrees. The magistrate judge did not err in keeping out evidence having to do with the exercise of discretion whether to extradite, because the magistrate judge has no discretion. Extradition is a matter of foreign policy entirely within the discretion of the executive branch, except to the extent that the statute interposes a judicial function.

Citation: Lopez-Smith v. Hood, 121 F.3d 1322 (9th Cir. 1997).

JURISDICTION

In case of Mexico's request for temporary restraining order to prevent execution of Mexican citizen in the U.S., Ninth Circuit dismisses for lack of jurisdiction under Eleventh Amendment which immunizes states against suits by foreign nations

An Arizona court convicted Ramon Martinez-Villareal, a Mexican citizen, for double capital murder in the U.S. and sentenced him to death. The State scheduled his execution for May 22, 1997. On May 16, the United Mexican States and two other Mexican officials (jointly Mexico) filed suit in federal district court against Arizona's Attorney General and the Arizona Department of Corrections. Plaintiffs sought a temporary restraining order and a preliminary injunction against the execution. Mexico argued that the execution of Martinez-Villareal would violate three treaties, as well as customary international law. The district court held that it lacked jurisdiction under the Eleventh Amendment.

The U.S. Court of Appeals for the Ninth Circuit affirms. The Eleventh Amendment to the U.S. Constitution provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."  It is well-established that this Amendment immunizes the states from federal suits by foreign nations.

The Court specifically rejects Mexico's argument that the suit is not against a state, but against state officials and therefore not within the Eleventh Amendment. The general rule is that relief sought nominally against an officer is in fact against the sovereign if the decree would operate against the latter. Here, Mexico is actually attempting to prevent the government of Arizona from carrying out the death penalty.

The U.S. Supreme Court does recognize an exemption under Ex Parte Young, 209 U.S. 123 (1908). Where the suit involves an injunction against a state official seeking a prospective remedy for a continuing violation of federal law, a federal court has jurisdiction to enjoin state officials from continuing such activity.

Here, Mexico claims that Arizona officials failed to notify Martinez-Villareal of his rights under the Vienna Convention on Consular Relations [21 U.S.T. 77]. It also did not report the arrest to Mexican Consular Officials as required under Articles I and VI of the Bilateral Consular Convention [57 Stat. 800] Moreover, the state allegedly failed to provide Mexico and Martinez-Villareal opportunities to mount an adequate defense. Finally, Arizona is planning to carry out the death sentence despite Martinez-Villareal's mental retardation. This would allegedly violate the International Covenant on Civil and Political Rights [999 U.N.T.S. 171]. [Editors' Note: The U.S. Senate gave its consent to the ICCPR on condition that the Covenant would not be self-executing as domestic U.S. law].

In the Court's view, Mexico's treaty-based challenges do not give rise to prospective relief under Ex Parte Young. The Arizona Superior Court had investigated and found Martinez-Villareal to be competent. Mexico has not challenged the validity of the Arizona procedures for determining competency. Therefore, there can be no prospective relief as to the prior state determination of Martinez-Villareal's competence to be executed. The Young doctrine focusses on cases where, unlike this case, a state official is engaged in ongoing violations of federal law in contrast with cases in which state officials have breached federal law during some period in the past.

Citation:  United Mexican States v. Woods, No. 97-15878 (9th Cir. October 7, 1997).

TESTIMONIAL IMMUNITIES

In wrongful death action by U.S. survivors of accident victim in Taiwan, Ninth Circuit holds that district court may compel appearance of Taiwanese individual despite claim of diplomatic immunity, but district court may not compel individual's testimony

In 1993, Peter Sun died in Taiwan during a study tour organized by several Taiwanese government organizations (jointly Taiwan). His relatives, all of whom are U.S. citizens, filed a wrongful death action against Taiwan in Illinois.

Taiwan sought a writ of mandamus to prevent parts of the testimony. The U.S. Court of Appeals for the Ninth Circuit grants the writ.

When the U.S. established relations with the People's Republic of China, it severed its diplomatic relations with Taiwan. U.S.-Taiwan relations are now governed by the Taiwan Relations Act (TRA) [22 U.S.C. §§ 3301-3316]. The relations are conducted by a non-profit corporation, the American Institute in Taiwan (AIT), and its Taiwanese counterpart, TECRO.

Although the U.S. does not maintain diplomatic relations with Taiwan, Taiwan is a "foreign state" within the meaning of the Foreign Sovereign Immunities Act (FSIA) [see 28 U.S.C. § 1604]. Since TECRO is a Taiwanese government instrumentality, it is immune from the jurisdiction of U.S. courts unless a FSIA exception applies.

Here, the plaintiffs argued that the FSIA's "commercial activity" exception applied [see 28 U.S.C. § 1605(a)(2)]. To support its claim that no subject matter jurisdiction existed, Taiwan presented declarations by Kang Seng Tsai, the Deputy Director of TECRO's Service Division in San Francisco, describing TECRO's activities in connection with the fateful study tour. The district court granted the plaintiffs' motion to take Tsai's deposition.

The court also specified the subjects about which the parties could question Tsai. The interrogation was to focus solely on Tsai's previous declarations and on the involvement of Taiwanese government agencies in the study tour. Taiwan then sought a writ of mandamus from the Court of Appeals, claiming that Tsai was entitled to "diplomatic" immunity.

The U.S. Court of Appeals for the Ninth Circuit issues the writ. It notes that the AIT-TECRO Agreement provides that "designated employees of each sending counterpart organization shall be immune from suit and legal processes relating to acts performed by them within the scope of their authorized functions ..." [see Article 5(e)]. The Agreement also states that "the archives and documents of the sending counterpart organization shall be inviolable." [See Article 5(c)]. Requiring Tsai to testify about TECRO's involvement in the study tour would, in the Court's view, contravene this provision. In addition, the International Organizations Immunities Act (IOIA) [22 U.S.C. §§ 288-288i] supports a finding that Tsai should be immune in this case.

Therefore, based on the AIT-TECRO Agreement, a court cannot compel a TECRO employee to testify about information he possesses solely by virtue of his official position. Tsai, however, also made declarations in support of Taiwan's motion to dismiss for lack of subject matter jurisdiction. In order to determine whether Taiwan is actually immune from jurisdiction, Mr. Tsai must appear for questioning about the matters referred to in his declarations.

  The district court must strictly limit the questioning of Tsai to the matters referred to in these declarations and cannot compel Tsai to answer questions whose answer he knows only by virtue of his official position. In deciding whether the Taiwan defendants are immune from jurisdiction under the FSIA, however, the district court may strike Tsai's declarations with respect to those factual allegations about which he refuses to testify.

Citation:  Taiwan v. U.S. District Court for the Northern District of California, No. 97-70375 (9th Cir. October 16, 1997).

TRADE

WTO publishes Dispute Settlement Panel Report on Indian legal protection for patents on pharmaceutical and agricultural chemicals

A Dispute Settlement Body of the WTO has decided that India breached its obligations under the TRIPS Agreement by failing to set up mechanisms to protect both novelty and priority for patents for pharmaceutical and agricultural chemical products. It also did not comply with Article 70.9 of TRIPS because it did not provide for exclusive marketing rights. [See 1997 Int'l L. Update 122]

The Panel based its decision on the following facts. In December 1994, while the Parliament was not in session, the President of India promulgated the Patents (Amendment) Ordinance 1994 to comply with Article 70.8 and 70.9 of TRIPS. A Press Note explained the background and purposes of the Ordinance. The Ordinance legally lapsed six weeks from the re-assembly of the Parliament. A Patents (Amendment) Bill of 1995 was to give permanent legislative effect to the Ordinance. It lapsed, however, when the Lower House (Lok Sabha) was dissolved on May 10, 1996, without adopting the Bill.

Based on an April 1995 administrative decision to await the change in Indian patent law, the government has separately stored applications for pharmaceutical and agricultural patents and has not referred them to a patent examiner. Between January 1, 1995 and February 15, 1997, the government received a total of 1,339 applications for pharmaceutical and agricultural chemical products and registered them under this interim procedure.

The WTO Panel ruled that this administrative arrangement was deficient under the TRIPS Agreement. The Panel therefore concluded (Section VIII.) that:

- India failed to carry out its obligations under Article 70.8(a) of TRIPS and, in the alternative, paras. 1 & 2 of Article 63. It did not provide for machinery that adequately preserves both novelty and priority for pharmaceutical and agricultural product patents during the transitional period and that puts out public information about such a mechanism. [This might consist of using a "mailbox" system that can receive patent applications and assign them a priority date for processing].

- India failed to comply with Article 70.9 of TRIPS for not setting up a system for granting "exclusive marketing rights" for novel products.

The WTO circulated the Panel Report among its Members on September 5, 1997. It is now publicly available.

Citation:  India - Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/R (September 5, 1997). [The Report is available at the WTO internet site www.wto.org.]

- China plans to lower Tariff rates by 6 percent.  According to a news release of the Chinese Embassy in Washington, D.C., China will lower the import and export tariff rate from 23% to 17% as of October 1, 1997. The reduction will affect more than 4,800 items. This amounts to about 73% of the goods subject to tariffs. According to the press release, China has lowered its tariff rate by 60% over the past five years. Citation: Newsletter of the People's Republic of China, No. 97-19, September 25, 1997 (www.china-embassy.org).

- U.S. and Canada open up five new ports under Pacific Albacore Tuna Treaty. On October 9, 1997, the U.S. and Canada amended the Treaty on Pacific Coast Albacore Tuna Vessels and Port Privileges (Washington, May 26, 1981). The amendment adds five Pacific ports to the list of ports designated for landing of albacore tuna by U.S. and Canadian vessels. The additional U.S. ports available to Canadian vessels are Westport, Washington; Newport, Oregon; and Eureka, California. The additional Canadian ports available to U.S. vessels are Vancouver and Coal Harbour. Citation:  U.S. Department of State Press Statement (October 10, 1997), available on the internet at http://secretary.state.gov.

- IRS amends regulations regarding tax withholding for foreign persons. The U.S. Department of the Treasury, Internal Revenue Service (IRS), has issued regulations regarding the withholding of tax on certain U.S. source income paid to foreign persons, on reporting of withholding, and on the statutory exemption for portfolio interest. It also repeals certain regulations regarding income tax treaties. The effective date of the regulations, with some exceptions, is January 1, 1999. In a related matter, the IRS has published proposed rules to permit the electronic transmission of the withholding certificate Form W-8. Citation:  62 Federal Register 53387 [tax withholding]; 62 Federal Register 53504 [proposed W-8 electronic transmission] (October 14, 1997).

- OAS Protocol dealing with forcible coups and extreme poverty enters into force. Effective September 25, 1997, an amendment to the Charter of the Organization of American States (OAS) entered into force. The amendment, called the "Protocol of Washington," authorizes the OAS to suspend OAS member states whose democratic government has been overthrown by force.  The OAS General Assembly had adopted the Protocol in 1992 and the required two-thirds majority of the Members ratified it.  Granting or lifting a suspension of a Member State on these grounds would also require a two-thirds vote of the Member States.  The Protocol also establishes the elimination of extreme poverty as one of the OAS' fundamental goals. Citation:  U.S. Department of State Press Statement (September 25, 1997), available on the internet at http://secretary.state.gov.

- Foreign investment and trade bills pending in Russian Parliament. According to a report from the U.S. Embassy in Moscow, the following foreign trade and investment bills are pending in the Parliament of the Russian Federation (Duma): - The Revised Foreign Investment Bill. The Bill on Foreign Investment passed the first reading in February 1997 but is currently being revised

based on comments from the public and the U.S. Department of Commerce. The bill consists now of (i) a main draft law with the general principles of national treatment, and (ii) a list of exceptions. For example, the bill includes provisions for simplified registration procedures, dispute settlement in foreign courts, and international arbitration. - The Bilateral Investment Treaty. The U.S.-Russia Bilateral Investment Treaty was signed in 1991 and consented to by the U.S. Senate in October 1992. The Duma has not yet ratified the Treaty but has instead submitted questions and objections to the Russian Government. The Ministry of Economy is coordinating the Government's responses. - The Foreign Trade Control Law. A bill establishing procedures for safeguards, countervailing duties, and anti-dumping actions passed the Duma in July 1996 but was vetoed by the President for alleged non-conformity with WTO rules. A revised version was voted down by the Federation Council in December 1996. A WTO-compliant version of the bill is expected in the Fall. Citation:  Information received from the U.S. Embassy Moscow through the U.S. Department of Commerce, Russian Desk, Phone: (202) 482-4655.