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.

1999 International Law Update, Volume 5, Number 8 (August).

ARBITRATION

In action to enforce ICC arbitral award against State of Qatar, D.C. Circuit finds FSIA exemption for arbitral awards applicable

In 1982, Creighton Ltd., a Cayman Islands company with offices in Tennessee, contracted with the State of Qatar to build a hospital in the capital of Doha. The agreement provided that Qatari law would govern its interpretation and that the parties had to settle their disputes by arbitration before the International Chamber of Commerce (ICC) in Paris.

In 1986, Qatar fired Creighton for inadequate performance. Creighton sought arbitration before the ICC and won an award of $8 million in damages, attorneys' fees and interest. Qatar then sought a declaration from the French courts that the arbitral award was invalid. The Supreme Court of France (Cour de Cassation) ultimately turned down Qatar's claim.

Creighton has nevertheless been unable to enforce its award in France because the Superior Court of Paris treated the specified assets as immune from attachment. Creighton's appeal from this ruling is currently pending before the Cour de Cassation.

Creighton then sued to enforce the arbitral award in federal court in the District of Columbia. Qatar claimed, inter alia, that the court lacked subject matter jurisdiction based on the Foreign Sovereign Immunities Act (FSIA) [28 U.S.C. Section 1330, Section 1602-1611].

The district court dismissed for lack of personal jurisdiction, and Creighton appealed. The U.S. Court of Appeals for the District of Columbia Circuit affirms.

The Court finds that the district court did have subject matter jurisdiction under the FSIA. The Court first notes that both France and the U.S., but not Qatar, are parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) [21 U.S.T. 2517, reprinted in 9 U.S.C.A. Section 201 (hist. and stat. note)].

Under the Restatement (Third) of Foreign Relations Law Section 487, comment b (1987), "the critical element is the place of the award: if that place is in the territory of a party to the Convention, all other Convention states are required to recognize and enforce the award, regardless of the citizenship or domicile of the parties to the arbitration." 

Therefore, if Qatar had the status of a private party, the U.S. district court would have subject matter jurisdiction. Since Qatar is a foreign state, however, the Court must take the FSIA into account.

Creighton claimed that Qatar had implicitly waived its immunity by agreeing to arbitrate in France [see 28 U.S.C. 1605(a)(1) (implied waiver), and (6) (jurisdiction to confirm arbitral award governed by international agreement)]. The FSIA unfortunately has no definition of "implied waiver."  The D.C. Circuit, however, follows the almost unanimous precedents that narrowly construe the implied waiver provision. These cases have read Section 1605(a)(1) to mean that the foreign state must have, by its actions, shown an intent to waive its sovereign immunity.

Qatar is not a party to the New York Convention. In the Court's view, Qatar's mere agreement to arbitrate in France, a signatory country, fails to show the requisite intent to waive its sovereign immunity in the U.S. Without indications of Qatar's intent to waive immunity, Section 1605(a)(1) does not exception for the enforcement of arbitral awards, Section 1605(a)(6), does confer subject matter jurisdiction even though Congress added it to the FSIA in 1988 after the transactions at issue. Retroactivity is not a problem here, the Court reasons, because Section 1605(a)(6) does not affect the parties' substantive rights. It only provides a U.S. forum in which to enforce these rights.

Citation: Creighton Ltd. v. Government of the State of Qatar, No. 98-7063 (D.C. Cir. July 2, 1999).

ATTORNEYS

German district court enjoins for-pay "lawyer hotline" as contrary to professional rules for lawyers and German competition law

The defendant in this German case offered legal information through a "0190" for-pay telephone number (like a "1-900" number in the U.S.), and advertised in a regional newspaper as follows:

"Lawyer Telephone. Legal consultation simple, fast, effective. 26 lawyers advise you 9.00 am - 9.00 pm. General: ... Special interests: labor, retirement benefits, social issues ... family, inheritance, traffic, criminal law ... rent, property, construction ... DM 3.63/minute [approximately U.S.$2/minute], responsible for this service is ..."

The plaintiff sought an injunction against offering this type of legal consultations by telephone chargeable by the minute. The plaintiff argued that (1) the Lawyer Hotline possibly involves lawyers in conflicts of interest (for example, both parties to a dispute might call the hotline), (2) the compensation of the attorney may be higher or may be lower than provided in the regulation of attorneys fees (referred to by its acronym BRAGO) [Editors' Note: In Germany, the amount of attorneys fees is government regulated. Lawyers must generally follow the government-set fee schedules in BRAGO for their services], and (3) this kind of legal consultation [should not be called] "effective" on grounds of competition law.

The district court of Moenchengladbach agrees with the plaintiff that this kind of lawyer hotline scheme violates both professional rules and general competition law, and issues a preliminary injunction.

The Court notes that the employment relationship between the hotline service provider and the "26 lawyers" is unclear. It may well violate BRAGO. This kind of hotline service may lead to violations of BRAGO, because the cost per minute is the same regardless of the importance of the legal matter that the caller is asking about. Therefore, this may lead to "attorneys fees dumping."  Also, the hotline service does not provide written explanatory statements regarding the consultation and the underlying legal issues, as well as a written bill for legal services, as BRAGO requires.

Thus, this kind of hotline is anti-competitive under the German Law Against Improper Competition (Gesetz gegen den unlauteren Wettbewerb, UWG). Furthermore, the term "effective" in the advertising is misleading. The hotline's legal advice is not necessarily better than the legal advice of an average lawyer.

Finally, the choice of "special interest" (Interessenschwerpunkt) telephone numbers, for example, for "labor" or "criminal law," suggests that the caller will be connected to a qualified specialist. Most lay callers are unaware that "special interest" is not an objectively verifiable qualification for lawyers — the designation "Specialized Lawyer" (Fachanwalt) is the proper term for true specialists.

The court therefore enjoins the defendant from advertising legal consultations through a for-pay telephone service.

[Editors' Note: In a 1992 opinion, the Kansas Bar Association held that a 900-telephone service called "Dial-A-Lawyer" is not per se unethical, but noted that the practice lends itself to abuse such as fee-splitting with non-lawyers. See KBA Ethics Opinion No. 92-06 (August 19, 1992).]

Citation: Landgericht Moenchengladbach (Federal District Court Moenchengladbach), Urteil vom 20. Mai 1999, 8 O 29/99 - Anwalts-Hotline. [German text of court decision is available through website: www.netlaw.de].

CRIMINAL LAW

Eleventh Circuit, sitting en banc, rules that, under Hobbs Act, government need only show minimal impact of extortion upon interstate or foreign commerce, whether beneficial or adverse

During 1984 and 1985, Barry Kaplan, a Miami, Florida resident, deposited as much as $500,000 into two banks in Panama through a local attorney named Pablo Arosemena. The latter had power of attorney over the funds apparently to enable Kaplan to evade U.S. taxes.

When Kaplan found himself in financial straits four or five years later, he tried to get the money back. Arosemena refused to cooperate, however, and threatened to report these offshore funds to the IRS. Kaplan decided not to pursue the funds in the Panamanian courts and enlisted the aid of Judge Roy Gelber and Raymond Takiff, a Florida attorney who had once represented General Manuel Noriega, then the de facto leader of Panama.

Takiff offered to use his contacts to have the Panamanian military pressure Arosemena but warned Kaplan that the latter could get himself killed under this scheme. Kaplan agreed to the plan. To help  himself in his separate criminal problems with the U.S., Takiff agreed with the government's plan to tape many of the conversations about the plot.

If the plot succeeded, Gelber and Takiff would share in the proceeds of Kaplan's funds. At the government's instigation, someone gave Kaplan the false information that the military had visited Arosemena and had used force against him.

A federal grand jury later indicted Kaplan for conspiring to commit extortion in violation of the Hobbs Act, 18 U.S.C. Section 1951, and for attempts to violate both the Hobbs Act and the Travel Act.

The jury convicted Kaplan on both counts and he duly noted his appeal. He argued, inter alia, that the U.S. had failed to make out a prima facie case that the alleged offenses had an impact on foreign commerce. A panel reversed his conviction, holding that, to satisfy the Hobbs Act, the government did have the burden of proving an adverse effect on independent, pre-existing commerce.

Deeming the issue of importance, the U. S. Court of Appeals for the Eleventh Circuit granted a rehearing en banc. The full court overturns the panel ruling 8 to 4 and affirms the conviction.

The statute provides that "[w]hoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined under this title or imprisoned not more than twenty years, or both."  The Act defines "commerce" to include "all commerce between any point in a state ... and any point outside thereof."

In this case, the Court has to decide whe­ther, looking at the evidence in the light most favorable to the government, enough evidence came in to allow a jury to find Kaplan guilty beyond a reasonable doubt. The Court found that it had.

"The government brought forth evidence that, if Kaplan's scheme had succeeded, commerce would have been affected. The conspiracy required at least one transaction between Florida and Panama -- payment of the extortion demand to Kaplan -- [for] the conspiracy to be of benefit to the coconspirators. Kaplan sought access to these funds because he had exhausted his personal assets, and the coconspirators were to be paid from the money Kaplan received. So, the jury was entitled to find that the movement of substantial funds from Panama to Florida was the object of the coconspirator's extortion plan." [1355] 

Having shown evidence of an impact upon commerce, the Court next determines whe­ther the panel was correct in requiring that only an adverse impact qualifies under the Hobbs Act. The en banc court concludes that it was wrong and overrules the precedent on which the panel had relied. It concludes that the broad language of the Act requires only some minimal effect on commerce, whether beneficial or adverse, actual or potential, direct or indirect.

The four dissenting judges contend that the majority holding will lead to the "federalization" of any crime involving extortion to acquire money. Under such an expansive reading, the Hobbs Act would "completely subsume state extortion and robbery laws by creating a federal criminal offense in each and every case in which the pay-off is at all likely to cross state lines. Surely, Congress cannot have intended any such result." [1358]

Citation: United States v. Kaplan, 171 F.3d 1351 (11th Cir. 1999).

EXPORT CONTROLS

In suit by developer of encryption "source code," Ninth Circuit strikes down Export Administration Regulations as, on their face, prior restraints of expression that contravene First Amendment

The closely guarded processes of cryptography essentially have to do with putting a readable message known as "plaintext" through a computer program that translates the message according to an equation or algorithm into unreadable "ciphertext." Naturally, the U. S. government is concerned with the preservation of secrecy for U.S. military and diplomatic communications and with its capacity to decipher similar materials sent by unfriendly foreign governments.

Moreover, foreign terrorists, drug smugglers or others who are hostile to U.S. interests can also use encryption to keep the U.S. from uncovering their plans and operations. Accordingly, the Export Administration Regulations (EAR) show the government's keen interest in halting or hampering the export of the most highly advanced and secure encryption methods.

Daniel J. Bernstein is a professor of mathematics and computer science at the Chicago campus of the University of Illinois. He developed "Snuffle," a method of encryption based on a "one-way hash function."  This is a function that makes it impossible to derive the input data given only the hash function's output.

Bernstein explained his methodology in two formats. The first was in an analytical paper with mathematical equations (the "Paper") and the second took the form of a high-level computer programming language ("source code"). Later, he translated his source code verbatim into an English text that explained how to program a computer for encryption using Snuffle. In the present state of technology, source code refers to the text of a program written in a high-level programming language with special rules of grammar, syntax and punctuation. Trained programmers regularly use it to express precise ideas or methods.

Since he wished to publish his work on Snuffle within the scientific community, Bernstein asked the State Department whe­ther he needed a license to do so. State answered that Snuffle constituted a "munition" under the International Traffic in Arms Regulations (ITAR). Therefore, Bernstein could not export any form of his work on Snuffle -- except the Paper -- without a license.

Bernstein later successfully sued various federal agencies and individuals to attack the constitutionality on their face of the ITAR under the First Amendment. The President then moved licensing authority for nonmilitary encryption technologies to the Commerce Department. This agency then put out the EAR. Amending his complaint, Bernstein raised the same objections as before.

Based on a facial challenge, the court gave summary judgment to Bernstein and enjoined enforcement of the invalid provisions. The United States took an appeal. The U. S. Court of Appeals for the Ninth Circuit, however, affirms in a two-to-one vote.

The Court first outlines the challenged regulations. The EAR specifically control the "export" of encryption software, explicitly including source code. The term "export" here includes the unlicensed publication through the internet and other global media if it would allow passive or active access by a foreign national inside the U.S. or by anyone elsewhere.

The licensing process goes through a case-by-case analysis within the relevant agencies. There is provision for an administrative appeal but with few time limits. Final decisions are not subject to judicial review.

The Court notes that a prior restraint on speech and publication is the least tolerable encroachment on First Amendment rights. Any such restraint on expression comes freighted with a heavy presumption against its constitutionality.

The EAR empower BXA administrators to deny export licenses whenever they conclude that export might be incompatible with "U. S. national security and foreign policy interests."  In the Court's view, this ostensible limitation vests an unbridled discretion in government officials.

As used by cryptographers, the Court declares, source code is expressive within the First Amendment. Bernstein may therefore facially challenge the regulations on First Amendment grounds.

To rescue a licensing scheme such as the EAR, the Supreme Court has formulated three factors. First, any prior restraint must last only for a specified and brief period. Secondly, there must be expeditious judicial review. Finally, the censor must shoulder not only the burden of going to court to suppress the expression in question but also the burden of persuasion.

The Court finds the EAR procedures pitifully deficient under these criteria. "Bernstein's experience itself demonstrates the enormous uncertainty that exists over the scope of the regulations and the potential for the chilling of scientific expression. In short, because the challenged regulations grant boundless discretion to government officials, and because they lack the required procedural protections ... we find that they operate as an unconstitutional prior restraint on speech." [1145]

Moreover, the Court observes, far more than the free speech of scientists and cryptographers, may be at stake here. These government restrictions may adversely affect the privacy interests of all who use electronic means of communication.

"Whether we are surveilled by our government, by criminals, or by our neighbors, it is fair to say that never has our ability to shield our affairs from prying eyes been at such a low ebb. The availability and use of secure encryption may offer an opportunity to reclaim some portion of the privacy we have lost." [1146] 

A dissenting judge contends that Bernstein is not entitled to prevail on a facial challenge to export controls on source code. Although academics and programmers occasionally use such a code to communicate their encryption techniques, its ultimate function is to direct a computer to encrypt and decrypt messages. The vast majority of users are interested only in these operations. It thus works much like encryption by dedicated computer hardware.

Moreover, the EAR regulates the export of a broad range of technology other than encryption source code. They are laws "of general application" directed mainly at conduct and are thus inappropriate for facial analysis.

Citation: Bernstein v. U. S. Department of Justice, 176 F.3d 1132 (9th Cir. 1999).

EXTRADITION

In case of extradition sought by International Criminal Tribunal for Rwanda, divided Fifth Circuit finds that extradition does not have to be based on formal treaty as long as there is executive agreement plus congressional consent

In 1996, the International Criminal Tribunal for Rwanda (ICTR) issued two indictments against Elizaphan Ntakirutimana, then President of the Rwandan Seventh Day Adventist Church, charging him with genocide-related crimes during the Rwandan ethnic unrest between the Hutu and Tutsi tribes.

In 1994, Ntakirutimana allegedly enticed Tutsis to seek refuge in a church complex in Mugonero, Gishyita Commune, Kibuye Prefecture, Rwanda, and then led a mob of armed Hutus to slaughter them. Ntakiruti­mana allegedly actively participated in the subsequent hunt for survivors of the massacre. Ntakirutimana left Rwanda the same year and moved to Laredo, Texas.

The President of the United States entered into an executive agreement with the ICTR in 1995, in which the U.S. agreed to surrender indicted individuals found in U.S. territory. The U.S. Congress enacted Pub.L. 104-106 to implement the Agreement.

The ICTR sought Ntakirutimana's extradition. A Magistrate Judge in the Southern District of Texas denied the U.S. Government's request for Ntakirutimana's surrender, holding Pub.L. 104-106 unconstitutional because extradition requires a treaty and, alternatively, finding that the supporting documents failed to provide probable cause.

After the U.S. Government provided more evidence, the district court found that the Agreement with ICTR and Pub.L. 104-106 provided a constitutional basis for the extradition, and certified the surrender to the ICTR.

Ntakirutimana appeals his denial of habeas corpus, alleging that the U.S. Constitution requires an Article II treaty for the surrender of a person to the ICTR and challenging the authority of the ICTR.

The U.S. Court of Appeals for the Fifth Circuit affirms. A treaty is not necessarily required for extradition. Article II, Section 2, Clause 2 of the U.S. Constitution enumerates the President's foreign relations powers. This provision does not refer to extradition or to the necessity of a treaty to extradite.

Ntakirutimana assumes that a treaty is required for an international agreement. That is incorrect, in the Court's view. The U.S. Constitution contemplates alternate modes of international agreements. The Supreme Court has recognized that the President may enter into "executive agreements" with foreign nations in ways that do not comply with the Constitution's treaty clause.

Furthermore, the Supreme Court has stated that Congress may provide for the extradition of foreign criminals with or without a treaty. Thus, it is not unconstitutional to surrender Ntakirutimana to the ICTR based on the executive agreement and the Public Law.

The Court also rejects Ntakirutimana's argument that the ICTR indictment fails to establish probable cause. The district court found that the witnesses and their declarations were credible, and the Court will not review those issues.

The Court therefore denies Ntakirutimana's petition for habeas corpus and lifts the stay of extradition.

The dissenter would issue the writ of habeas corpus because the extradition agreement between the U.S. and the ICTR, implemented by a Public Law, is unenforceable as circumventing constitutional requirements.

"A structural reading of the Constitution compels the conclusion that most international agreements must be ratified according to the Treaty Clause of Article II. The history of national and international practice dent have authority to negotiate such agreements, but also that they be ratified pursuant to a special process intended to set a higher standard of legislative agreement than that required for ordinary legislation."

"The Constitution thus provides a plain procedure for entering into a treaty, which requires the assent of the President and two-thirds of the Senate. That procedure was not followed with respect to the executive agreement to extradite fugitives to the International Criminal Tribunal for Rwanda, and the procedure is not satisfied by the combination of an executive agreement and ordinary legislation." [Slip op. 34-35]

Citation: Ntakirutimana v. Reno, No. 98-41597 (5th Cir. August 5, 1999).

HUMAN RIGHTS/IMMIGRATION

Second Circuit finds that well-founded fear of female genital mutilation (FGM) in home country may be grounds for granting asylum in U.S. to illegal alien

Adelaide Abankwah, a native of Ghana, entered the U.S. with a falsified passport and petitioned for asylum. She alleged that her tribe (the Nkumssa tribe in central Ghana) would subject her to FGM as a punishment for premarital sex. FGM consists of amputation of the whole of the clitoris and all or part of the labia minora.

Abankwah's mother had held the position of the tribe's Queen Mother until her death in 1996. Abankwah testified that it was very likely that the tribe would designate her the next Queen Mother, a position that requires virginity until the official designation ceremony. Since Abankwah had already had a sexual relationship, she fled Ghana and came to the U.S.

The Immigration Judge found that Abank­wah failed to establish that her fear of FGM was objectively reasonable because (1) FGM was practiced mostly in northern Ghana, (2) the practice of FGM was generally declining in Ghana, and (3) Ghana criminalized FGM in 1994.

On appeal, the Board of Immigration Appeals (BIA) found Abankwah's evidence insufficient to support her claims of persecution based upon her membership in a social group, in this case: Nkumssa women who did not remain virgins until marriage.

The U.S. Court of Appeals for the Second Circuit finds Abankwah's fear of persecution objectively reasonable, reverses the BIA decision, and orders the petition to be granted.

Under 8 U.S.C. Section 1158(a), an asylum applicant must establish that he or she is unable or unwilling to return to his or her home country because of a "well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion ..."  This well-founded fear has both a subjective and an objective component. The objective component requires other proof or objective facts that support the reasonableness of the applicant's subjective fear.

The Court notes that international human rights law has recognized FGM as a violation of women's and female children's rights, and the U.S. has criminalized the practice. [See 18 U.S.C. Section 116 (Supp. II 1996)].

In this case, Abankwah was unable to present other proof about the customs of her particular tribe, only general testimony about Ghana as a whole. The Court nevertheless considers the evidence enough in this case.

"Without discounting the importance of objective proof in asylum cases, it must be acknowledged that a genuine refugee does not flee her native country armed with affidavits, expert witnesses, and extensive documentation. ... In this case, Abankwah has presented, through her affidavit and her own plausible, detailed, and internally consistent testimony, combined with evidence of the pervasiveness of FGM in Ghana and the testimony and affidavit of [an expert], strong evidence to demonstrate that her fear of FGM is objectively reasonable." [Slip op. 23].

A reasonable person who knows of the Nkumssa's customs and has disobeyed a tribal taboo would share Abankwah's fears. Thus, Abankwah's fear of FGM is sufficient to satisfy the objective element of the test for well-founded fear of persecution.

[Editors' Note: In a decision published on August 18, 1999, the Board of Immigration Appeals (BIA) vacated its earlier decision and granted asylum to Abankwah.]

Citation: Abankwah v. Immigration and Naturalization Service, No. 98-4304 (2d Cir. July 9, 1999).

INTERNET

German State Supreme Court holds that commercial internet service cannot simply provide links to competing website host without permission or indicating copyright

The following case concerns a dispute between two competing Internet companies that provide "homepages" within a certain Internet domain. The plaintiff ("weyhe-online") provides homepages within the domain "weyhe-online.de."  This service focuses on a local community, Weyhe, and contains information, advertisements, and website links concerning local restaurants and businesses, associations, the police, and local events. Customers have their own home pages whose names start with the domain name "weyhe-online.de/....."  The site also contains indirect advertising in the form of notices, sponsorships, and factual-sounding reports.

The defendant provides links from its domain to the several homepages that plaintiff "weyhe-online" hosts. The links do not indicate that "weyhe-online" actually hosts the homepages and there is no copyright notice mentioning "weyhe-online."

The State Supreme Court (Oberlandesge­richt, OLG) in Celle, Lower Saxony, enjoins the defendant from providing links, without permission or copyright notice, from its domain to the homepages that "weyhe-online" hosts. Applying the Law Against Improper Competition (Gesetz gegen den unlauteren Wettbewerb,UWG), the Court rules that the defendant cannot, without permission or copyright notice, list his customer's homepage in his Internet domain if another party actually hosts the homepage.

In the Court's view, the defendant's actions give it an undue competitive advantage over the plaintiff. Both plaintiff and defendant provide the same kind of information and homepage hosting service. The more homepa­ges and links the domain website contains, the more attractive it is to users.

By displaying plaintiff's work product, defendant thereby "acquires the work product" (unmittelbare Leistungsuebernahme) with little effort of its own, thus gaining an undue competitive advantage. Users may find plaintiff's information and homepage links in the defendant's domain without actually visiting the plaintiff's domain. This makes plaintiff's domain become less attractive to advertisers, causing plaintiff to lose advertising revenue.

Citation: Oberlandesgericht Celle, Urteil vom 12. Mai 1999, 13 U 38/99. [Decision is available in German on following website: www.netlaw.de.]

JURISDICTION (PERSONAL)

In action to enforce ICC arbitral award against State of Qatar, D.C. Circuit affirms dismissal for lack of personal jurisdiction under Due Process Clause of Fifth Amendment

[For the preliminary facts, see ARBITRATION, above] Creighton sued to enforce an ICC arbitral award in federal court in the District of Columbia. Qatar moved to dismiss on grounds that, because Qatar does not have sufficient contacts with the U.S., the court lacked personal jurisdiction under the Due Process Clause of the Fifth Amendment of the U.S. Constitution. The district court granted the motion and Creighton appealed. The U.S. Court of Appeals for the District of Columbia Circuit affirms the dismissal of Creighton's action.

The Court first points out that the FSIA requirement of personal jurisdiction does not affect the constitutional in personam jurisdiction requirement of the Due Process Clause. Here, Qatar entered into a contract with a U.S. company that provided for ICC arbitration. Since Qatari law allegedly does not recognize or enforce arbitral awards, Creighton argued that Qatar would have foreseen that Creighton might seek to enforce an award in the U.S. The Court disagrees.

The parties admittedly had some contacts in the U.S. before finalizing the contract. "These contacts, however, do not demonstrate that Qatar purposefully availed itself of the laws of the United States and hence should reasonably have anticipated the risk of being haled into court here. Creighton's reliance upon the mere fact that Qatar contracted with a United States company ... is misplaced, for the Supreme Court has squarely rejected the proposition that 'an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum.'" [Slip op. 26]

Citation: Creighton Ltd. v. Government of the State of Qatar, No. 98-7063 (D.C. Cir. July 2, 1999).

TERRORISM

D.C. Circuit rejects challenges by political groups from Sri Lanka and Iran to their listing by Secretary of State as "foreign terrorist organizations" under Antiterrorism statute

Under the Antiterrorism and Effective Death Penalty Act, the U.S. Secretary of State may designate "foreign terrorist organizations" [see 8 U.S.C. Section 1189] that threaten the security of U.S. nationals or of the U.S. In 1997, Secretary of State Madeline K. Albright designated the People's Mojahedin Organization of Iran (MEK) and the Liberation Tigers of Tamil Eelam (LTTE) [see 62 Federal Register 52650]. Both groups sought judicial review of their designations.

The LTTE is a group founded in 1976 to create a separate Tamil state in Sri Lanka. It is estimated that more than 50,000 people have died since the group began its war against the Government of Sri Lanka in 1983.

Some have called the MEK "the largest and most active Iranian dissident group."  This group had originally cooperated with the Ayatollah Khomeini in overthrowing the Shah and has assassinated at least six U.S. citizens.

This statute specifically authorizes the Secretary of State to make "findings" that a foreign organization is engaging in terrorist activities that threaten the national security of the U.S. The information on which such a decision rests is not necessarily public and may consist entirely of hearsay.

Also, there are severe repercussions from being listed. A listed organization's bank accounts become subject to seizure and the U.S. may prosecute anyone who knowingly donates to such entities.

In the Court's view, the record of the Secretary of State contains "substantial support" for her findings that the organizations engage in "terrorist activities" within the meaning of the statute. Any one of the incidents attributed to these organizations would have satisfied a "terrorist" designation under the statute.

"We therefore refuse to set aside either designation. ... We reach no judgment whether the material before the Secretary is or is not true. ... As we see it , our only function is to decide if the Secretary, on the face of things, had enough information before her ... to come to the conclusion that the organizations were foreign and engaged in Terrorism. Her conclusion might be mistaken, but that depends on the quality of information in the reports she receives — something we have no way of judging. [Slip op. 22-23]

Citation: People's Mojahedin Organization of Iran v. U.S. Dep't of State, Nos. 97-1648 & 97-1670 (D.C. Cir. June 25, 1999).

TORT LIABILITY

In divided ruling, Canadian Supreme Court declines to impose vicarious liability on youth club for Program Director's sexual assaults on two members mainly at Director's home

The Boys' and Girls' Club of Vernon, British Columbia (BGC), is a non‑profit organization incorporated under the Societies Act. In 1980, it hired Harry Charles Griffiths as its Program Director. His chief duties were to oversee the staff of volunteers and to put together recreational programs and occasional excursions. The BGC also encouraged Griffiths to develop a positive and friendly camaraderie with the children at the Club.

Randal Craig Jacobi and Jody Marlane Saur, a brother and sister from a troubled home, belonged to the BGC during much of the 1980s. In 1992, Jacobi reported that Griffiths had sexually assaulted him on one occasion at Griffiths' home in 1982. Saur also declared that, during the same period, Griffiths had placed her hand on his exposed penis in the BGC van and once had intercourse with her at his home outside working hours.

These complaints led to a police investigation and to Griffith's discharge from the BGC. Later he entered a guilty plea to fourteen counts of sexual assault involving Jacobi, Saur and other children.

Jacobi and Saur then sued the BGC and Griffiths for damages. They contended that the court should find the BGC (1) vicariously liable for the intentional sexual abuse by its employee, as well as (2) directly liable to plaintiffs for negligence and breach of fiduciary duty. Ruling only on theory (1), the trial judge held for the plaintiffs.

The Court of Appeal allowed the BGC's appeal. In a 4 to 3 vote, however, the Supreme Court of Canada dismisses the appeal and remands the matter for trial on theory (2).

The majority does a two-step analysis. First, a court should ascertain whether the prior case law unequivocally indicates whe­ther the case at hand falls within vicarious liability or no liability. Secondly, if the precedents are unclear, the court has then to decide whether it should apply vicarious liability principles pursuant to wider policy considerations.

The majority first concludes that the wide spectrum of pertinent Canadian case law is reasonably clear. It indicates that applying no‑fault liability to this case would exceed the present judicial consensus. Even where privileged access to the victim goes along with the job‑created opportunity (as here), Canadian courts have generally failed to discern a strong enough link between the type of risk attributable to the job and the actual assault that took place.

On the other hand, where a combination of job‑created power and job‑created intimacy had heightened the strong nexus between the job and the sexual assault, the courts have held the employer vicariously liable. In the majority's view, neither of the aggravating factors existed in this case to the required extent.

Secondly, the Court looks into the relevant policy considerations. One reason for imposing no-fault liability on an employer is to compensate the victim for the torts of a person hired to advance the organization's economic interests. In the majority's view, however, this rationale does not work well with non-profit enterprises. For one thing, they do not function in a market context. Thus they have little or no capacity to digest the cost of no‑fault liability such as by boosting prices to consumers to spread the true cost of "doing business."

The Court also notes that deterrence is another important policy. Relevant factors include the nature of the behavior to be deterred, the kind of liability at issue and the type of enterprise involved. The enterprise, however, is entitled to demand the showing of a "strong connection" between the employment risk and the sexual assault.

In the majority's view, the necessary strong connection did not exist in this case. The BGC's function was to provide group recreation with many individuals present on each occasion. Here, Griffiths' sexual success turned on his success in isolating the victims from the group. The majority concludes that the chain of events consisted of Griffiths' autonomous schemes to gain sexual gratification. Hence, the sexual wrongdoing was too distant from the employer's group programs to warrant "no fault" liability.

Applying the same principles to the same record, the four dissenting justices reach a contrary conclusion. In their view, the evidence and findings of the trial judge show that nature of the job at BGC substantially increased the risk of the sexual assaults on plaintiffs.

The dissenters characterize the BGC environment as encouraging adult mentoring at Club activities. This mentoring logically would extend to interaction with the children outside the presence of other grownups. The BGC affirmatively called for an intimate relationship between Griffiths and the youngsters.

Moreover, the troubled and vulnerable nature of many of the clients aggravated the risks inherent in this ap­proach. Finally, the dissenters feel unable to ignore the trial judge's finding that Griffiths had exercised a "god-like" power over his two victims.

Plaintiffs both came from a home racked by family turmoil generated by their mother's numerous marriages, quarrels and divorces. Since the BGC conferred on Griffiths a position of trust and power, it facilitated his abuse of that power. Thus, sound policies of fair compensation and deterrence warrant holding the BGC liable for the damages Griffiths has caused to plaintiffs.

Citation: Jacobi v. Boys' and Girls' Club, File No. 26041, 1999 Can. Sup. Ct. LEXIS 34.

WIRETAPPING

German Constitutional Court upholds statute allowing secret service to randomly monitor domestic and international telephone and fax communications without warrant or particular suspicion but requires legislature to devise appropriate protections

Several parties, including Michael Koehler, a law professor of the University of Hamburg, had challenged the constitutionality of the so-called "Anti-Crime Law of 1994" (Verbrechensbekaempfungsgesetz von 1994). Because of its broad scope, some have referred to this Law as the "electronic vacuum cleaner."  Before the Law came into effect, the federal Secret Service (Bundesnachrichten­dienst, BND) could use wiretapping only to investigate armed attacks on Germany.

According to the new Law, however, the Secret Service may monitor all telephone communications for suspicious communications, including drug trafficking, terrorism, and counterfeiting of money. Some media stories declare that the Secret Service monitors about 15,000 communications daily, and discovers suspicious activities in about 20 of them.

The German Constitutional Court (Bundesverfassungsge­richt, BVerfG), based in Karlsruhe, Germany, eventually reviews the case. The Court emphasizes that telephone communications should generally be confidential, but also agrees with the government that there must be exceptions to protect important public interests.

The Court thus applies a balancing test in determining whether the public interests that specific provisions of the Law seek to protect outweigh the interests of the individuals whose communications the government is tapping. On the one hand, the Court rules that the wiretapping of telephone and fax communications infringes the privacy guaranteed in Article 10 of the Basic Law (Grundge­setz, GG). On the other, it may be justified by the threat that the offenses specified in the 1994 Law, including terrorism and drug trafficking, pose to national security.

Article 10 of the Basic Law protects all telephone communications. This protection applies to content, to the processing of wiretapped data, as well as to its dissemination. The government, however, has to reasonably regulate Wire communications in the public interest.

If the government taps into such communications, its purpose must be reasonable and clearly defined. The Secret Service must later notify affected individuals about the interception of their communications. Article 10 requires control of the wiretapping processes by independent government organizations. Finally, the government must destroy data obtained through wiretaps once it has served its purpose.

With this decision, the Court struck down seven provisions of the Law that it found to violate the telephone secrecy rules. These include provisions that allowed wiretapping to investigate counterfeiting committed abroad, and that let other law enforcement agencies make use of the data. Thus, the legislature has to revise the Law to streng­then parliamentary supervision over the Secret Service, to provide for notice to affected parties, and to control the promulgation of data to third parties.

The decision, therefore, requires the Federal Parliament (Bundestag) to revise certain aspects of the 1994 law. By June 30, 2001, it must impose the specified limits and controls on this kind of surveillance.

[In a related matter, the Japanese Parliament (Diet) recently granted Japanese police authority to use wiretaps in criminal investigations. See Washington Post of August 13, 1999, page A20.] 

Citation: BVerfG, Erster Senat, Entscheidung vom 14.07.1999 - 1BvR 2226/94, 1BvR 2420/95, 1BvR 2437/95. [Press release (Pressemitteilung Nr. 74) by Court, containing extensive summary of decision in German is available through website of law department of University Saarbruecken, Germany, www.jura.uni-sb.de; Sueddeutsche Zeitung, July 15, 1999; The Week in Germany (July 16, 1999).]

Russia liquidates Agency of Patents and Trademarks. With Presidential Decree No. 651 (enacted May 25, 1999), the Russian Federation has abolished the Russian Agency for Patents and Trademarks (Rospatent), and had transferred its functions to the Ministry of Justice. Regulations pertaining to the new tasks of the Ministry will come out within a few weeks. Observers have opined that the Ministry has no concrete plan of action for the moment, and that the shift of these tasks to the Ministry is due to the significant revenues that they generate. Citation: Latest Developments in Area of Intellectual Property, Report prepared by law firm of Steptoe & Johnson, distributed with law firm's permission by BISNIS, U.S. Department of Commerce, Phone: (202) 482-2022.

EU and Canada conclude agreement on competition laws. With Decision 1999/445/EC of April 29, 1999, the Council and the Commission of the European Communities approved the Agreement between the EU and the Government of Canada regarding the application of their competition laws. The purpose of the Agreement is to promote cooperation and coordination between the competition authorities of both parties (as listed in Annex A to the Agreement. In the UK, for example, it is the Office of Fair Trading). Each party will notify the other party regarding enforcement activities that may affect important interests of the other party. The Agreement describes the manner and content of such notification in detail. The Agreement also provides for cooperation over anticompetitive activity in the territory of one party that adversely affects the interest of the other party. Citation: 1999 O.J. of the European Communities (L 175) 49, July 10, 1999. [Text of the Agreement, along with related information, is attached to Council and Commission Decision.]

Recent changes in Russian tax laws will affect foreign companies. On March 31, 1999, the President signed Federal Law No. 62-FZ "On Amendments and Additions to the Law of the Russian Federation on Tax on Profits of Enterprises and Organizations."  The changes to the Corporate Profits Tax provide for three  types of change. First, it reduces the profit tax rate for most foreign companies from 35% to 30%; the tax rate on profits for intermediary activities, banks and insurance goes down from 43% to 38%; and the fixed federal profit rate declines from 13% to 11%. Secondly, tax registration and profit tax requirements for foreign companies will be the same as for Russian companies. There will be quarterly profit declarations and monthly tax payments (the Ministry for Taxes and Levies issued an explanatory letter on this on June 28, 1999). Finally, the Law creates new tax exemptions, for example, for new production facilities with an investment of more than 20 million rubles. — The same day, the President signed Federal Law No. 64/FZ "On Amendments and Additions to Individual Legislative Acts of the Russian Federation on Taxes."  The changes to the VAT Tax Law make foreign companies, regardless of their legal form, responsible for VAT payments. Foreign companies must withhold VAT from payments to foreign legal entities not registered in Russia for VAT purposes. — The laws entered into force on April 1, 1999. Citation: Russian Federation, Laws Nos. 62-FZ and 64-FZ, published in Rossiyskaya Gazeta of April 7, 1999. [The information on Amendments to Russian Tax Legislation was prepared by US & Foreign Commercial Service in Russia and distributed by U.S. Department of Commerce, BISNIS, Phone: (202) 482-2022.]

Agreement on humane trapping standards has entered into force between EU and Canada. The Agreement on international humane trapping standards between the European Community, Canada and the Russian Federation entered into force between the European Community and Canada on a bilateral basis on June 1, 1999. The 1998 O.J. of the European Communities (L 42), published the Agreement on February 14, 1999. Citation: 1999 O.J. of the European Communities (L 175) 61, July 10, 1999.