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 10 (October).

ARBITRATION

Second Circuit confirms arbitration award involving Toys "R" Us representative in Kuwait, holding that New York Convention limits bases for relief from award, if enforced in foreign state, to grounds stated in Convention itself

The licensing agreement between Toys "R" Us and Yusuf Ahmed Alghanim & Sons (Alghanim) for toy stores in the Middle East did not turn up many profits.  Alghanim's four Toys "R" Us stores in Kuwait lost $6.65 million from 1982 through 1993. Toys "R" Us eventually concluded a licensing agreement with a different company. 

In 1991, Alghanim had asked Toys "R" Us to share more responsibilities and capital expenditures.  Toys "R" Us instead tried to renegotiate or terminate the agreement.  Finally, Toys "R" Us began an arbitration through the American Arbitration Association.  It asked for a declaration that the agreement had ended on December 31, 1993.  Alghanim counterclaimed for breach of contract.  The arbitrator awarded Alghanim $46.44 million for lost profits plus interest.

The district court granted the petition to confirm the award based on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") [21 U.S.T. 2517, 330 U.N.T.S. 38, reprinted in 9 U.S.C. § 201].  Toys "R" Us appealed, arguing under the Federal Arbitration Act (FAA) [9 U.S.C. § 1] that the award was clearly irrational and manifestly disregarded the law.

The Second Circuit affirms.  The Court agrees with Toys "R" Us that the FAA and the New York Convention overlap.  That is true, however, only to the extent that the two do not conflict.  Where the Convention prescribes the exclusive grounds for relief from an award, this bars application of the FAA's implied grounds for relief.  Considerable case law now holds that the bases for relief set forth in Article V of the Convention are the only grounds available for setting aside a foreign arbitral award.

"In sum, we conclude that the Convention mandates very different regimes for the review of arbitral awards (1) in the state in which, or under the law of which, the award was made, and (2) in other states where recognition and enforcement are sought. The Convention specifically contemplates that the state in which, or under the law of which, the award is made, will be free to set aside or modify an award in accordance with its domestic arbitral law and its full panoply of express and implied grounds for relief.  See Convention art. V(1)(e).  However, the Convention is equally clear that when an action for enforcement is brought in a foreign state, the state may refuse to enforce the award only on the grounds explicitly set forth in Article V of the Convention." [slip op. 24-25]

This being a non-domestic award tried in the U.S., FAA implied grounds can apply.  The Court, however, rejects Toys "R" Us' challenges based on the FAA.

Citation:  Alghanim & Sons, W.L.L.  v.  Toys "R" Us, Inc., No.  96-9692 (2nd Cir.  September 10, 1997).

ENVIRONMENTAL LAW

In aftermath of WTO Tuna-Dolphin dispute, U.S. amends Marine Mammal Protection Act of 1972 to permit imports of tuna harvested in compliance with international Dolphin Conservation Program

The Tuna-Dolphin dispute provides two recent examples of the conflict between environmental and trade laws [see, e.g., Dispute Settlement Panel Report on United States Restrictions on Imports of Tuna, 30 I.L.M.  1594 (1991); United States - Restrictions on Imports of Tuna: Report of the Panel, 33 I.L.M.  842 (1994)].  There, the U.S. imposed unilateral trade sanctions to enforce compliance with the Marine Mammal Protection Act of 1972 (MMPA) [Pub.L. No.  92-522, 86 Stat. 1027].  In the Tuna-Dolphin cases, two GATT panels determined that GATT does not justify the U.S.' restrictions of canned tuna from nations that do not enforce dolphin-safe fishing methods on environmental grounds.

In the so-called Declaration of Panama (October 4, 1995), 12 nations, including the U.S., France, and Mexico, agreed to reduce the total annual dolphin kill to below 5,000.  This applied to the purse seine fishery for yellowfin tuna in the eastern tropical Pacific Ocean.

In the “International Dolphin Conservation Program Act,” the U.S. Congress has amended the MMPA to allow companies to import tuna as long as the harvest obeyed the international Dolphin Conservation Program (DCP).  The Act further provides that an American purse-seine fishing vessel may obtain "permits" for the taking of dolphins during tuna harvesting.  Finally, it defines the phrase "dolphin safe" on a product label.  It means that, when the fisherman had caught the tuna, they had obeyed the DCP or like constraints on incidental dolphin mortality.

Upon funding of the necessary studies and adoption of the DCP by the Inter-American Tropical Tuna Commission, the Act will take effect.  The Secretary of Commerce, however, can now issue regulations based on the Act.

Citation: Pub.L. No. 105-42 [H.R. 408], 111 Stat. 1122 (August 15, 1997).

ENVIRONMENTAL LAW

Major environmental EU directive to control "biocidal products" currently pending; the directive will affect thousands of products sold in the EU

In most industrialized nations, hazardous materials are considered either:

- hazardous substances or preparations (industrial substances such as formaldehyde, or preparations such as cleaning agents); or

- pesticides, which serve to control organisms and plants that adversely affect agriculture.

In the United States, the main law controlling hazardous substances and preparations is the Toxic Substances Control Act (TSCA) [15 U.S.C. 2601-2692].  For pesticides, it is the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) [7 U.S.C. §§ 136 to 136y].  The equivalents in the European Union (EU) for hazardous substances and preparations are Directives 67/548/EEC [dangerous substances] [1967 O.J. 196] and 88/379/EEC [dangerous preparations] [1988 O.J. (L 187)].  Agricultural pesticides (called "plant protection products" in EU terminology) are regulated by Directive 91/414/EEC [1991 O.J. (L 230)].

Generally speaking, hazardous substances have been classified based on the physical hazards (such as flammability) and their health hazards (such as toxicity or sensitization).  The European Union, however, has recognized in recent years that there is a class of hazardous chemicals that, based on their properties, are not technically "hazardous chemicals" or "pesticides."  These are chemicals that "control" organisms in some way -- called "biocidal products" or "biocides."

Therefore, in the EU, new regulatory requirements are developing to control such "biocidal products."  A directive on biocidal products is currently pending.  The directive would apply to all products that contain biocidal substances or are themselves biocidal.  It will include products such as swimming pool disinfectants, insect repellents, pest control products, anti‑foulants, and preservatives.  The impact of the biocides directive is tremendous; it will affect thousands of products sold in the EU.

Essentially, it applies to all substances that "control" organisms.  Dangerous substances under Directive 67/548/EEC [dangerous substances], however, are not excluded.  Therefore, it is possible that dangerous substances that have biocidal properties and that are already on the market must eventually be also reviewed as biocides.  Agricultural pesticides are expressly excluded from coverage.

The directive will create a register of authorized biocidal active ingredients to be listed in Annex I.  A substance would receive authorization for a maximum of ten years.  Approval of biocidal products containing substances listed in Annex I would be left to the Member States.  Approval of a product in one Member State would permit marketing in any other EU country without further permits.

Manufacturers and distributors can take advantage of the ten-year transitional period:  The proposal allows for a ten-year transitional period during which Member States would be able to authorize products containing active substances that were already on the market prior to the Directive's entry into force but which had not yet been assessed for inclusion in Annex I.

Currently, the biocides directive will become effective 24 months after entry into force.  The pending directive is currently going through another reading by the European Parliament.  Therefore, it will certainly not be adopted before the end of the year.

Citation: Common position No 10/97 ... with a view to adopting a European Parliament and Council Directive concerning the placing of biocidal products on the market, 1997 O.J. (C 69) 13.

ENVIRONMENTAL LAW

Based on outcome of WTO dispute about imported gasoline, U.S. Environmental Protection Agency issues baseline requirements for foreign gasoline

The WTO Gasoline case [World Trade Organization: Report of the Panel in United States - Standards for Reformulated and Conventional Gasoline (January 17, 1996), 35 I.L.M.  274 (1996)] was the first WTO "case" decided under the new WTO dispute settlement rules.  [See 1996 Int'l Law Update 46 & 56]

Early in 1995, Venezuela and Brazil separately asked for consultations.  They were concerned with whether EPA's 1993 "Gasoline Rule" violated GATT regulations [Regulation of Fuels and Fuel Additives -- Standards for Reformulated and Conventional Gasoline, 40 C.F.R. 80, 59 Fed. Reg. 7716 (February 16, 1996)].  The Clean Air Act [42 U.S.C. 1857] and the Gasoline Rule had set standards for reducing pollution from vehicle emissions, especially as to ozone.  On January 17, 1996, the Panel ruled that the EPA's "Gasoline Rule" discriminated against foreign producers and importers of gasoline.

Beginning in January 1995, the Gasoline Rule required the sale of "reformulated" gasoline in certain U.S. regions with high levels of air pollution.  The Rule measures compliance by refiners and importers against a refinery's or importer's 1990 gasoline quality.

Domestic refiners have to establish individual refinery "baselines" of the quality and quantity of the gasoline produced at each refinery in 1990.  Almost all foreign refiners and importers, however, lack the actual 1990 test data necessary to establish an individual baseline.  Therefore, foreign refiners and importers had to use the 1993 statutory baseline.  EPA set this baseline to approximate average gasoline quality in the United States in 1990.

The Environmental Protection Agency (EPA) has issued a final rule to revise the requirements for imported conventional gasoline.  It applies to foreign refiners and importers of gasoline and allows foreign refiners to use an individual "baseline."  The rule also includes requirements for tracking the movement of foreign gasoline and monitoring compliance.  The effective date of the rule is August 27, 1997.

Citation: 62 Federal Register 45533 (August 28, 1997).

EVIDENCE

Eleventh Circuit rules that U.S. privilege against self-incrimination does not apply to alleged alien war criminal liable to prosecution in foreign nations

Vytautas Gecas is a Lithuanian citizen who has lived in the U.S. as a resident alien for 34 years.  During 1992-93, allegations arose that Gecas had taken part during World War II in the persecution of persons on account of their race, religion or political opinion.  This type of behavior, if proved, would make Gecas deportable under 8 U.S.C. § 1251(a)(4)(D) (1994). 

When the Office of Special Investigations directed an administrative subpoena at Gecas to answer questions about these matters, Gecas invoked the Fifth Amendment right not to testify.  The government then got an enforcement order from a district court.  Gecas appealed and a divided three-judge panel reversed.  The government successfully petitioned for rehearing en banc.  A six-judge majority of an eleven-judge panel disagrees with the regular panel and orders Gecas to answer the questions posed. 

For the privilege to apply to foreign proceedings, the Court notes, Gecas must establish two points.  First, he must prove that the information he would disclose by testifying would incriminate him under the foreign law of one or more countries.  Second, he must have a real and substantial fear of foreign conviction and not a merely speculative possibility of same.  Using the procedures of Fed. R. Civ. Pro. 44.1, the district court found that Gecas' testimony would incriminate him under the laws of Israel, Germany and Lithuania. 

[Israel clearly prosecutes war criminals committed outside that country under its Nazi and Nazi Collaborators (Punishment) Law of 1950.  Though the issue is close, the Court also decides that German murder jurisdiction extends to the prosecution of non-citizens who committed war crimes outside German territory.  Finally, the Court concludes that Lithuania could prosecute Gecas under its Genocide Law.]

Moreover, the lower court's factual finding that there is a real and substantial danger of such prosecutions in these countries was not clearly erroneous.  Important factors in this equation are whether the foreign governments would learn of his testimony, whether there is an existing or potential foreign prosecution of Gecas and whether, on any of the charges, the U.S. could extradite Gecas to one or more of the three countries.  The main goals of the OSI are to work with foreign prosecutors to expel war criminals from the U.S. and to assist in their prosecution abroad.  Moreover, the U.S. has extradition treaties with all three nations. 

Finally, as a matter of first impression, the Court holds that such a real and substantial fear of foreign prosecution may trigger Fifth Amendment protections.  On the other hand, a careful examination of the long history of the problem of forced self-incrimination leads the Court to conclude that the Fifth Amendment does not apply to foreign court proceedings involving foreign citizens.  A proceeding becomes a "criminal case" only when a witness faces conviction based on his compelled testimony in a jurisdiction subject to the Fifth Amendment.  Nor does the cooperation between the OSI and foreign governments make those sovereign states into mere "agents" of the U.S. to whose proceedings the Fifth might apply. 

Citation: United States v. Gecas, No. 93-3291 (11th Cir. August 26, 1997)(en banc).

INVESTMENT

Switzerland changes property restrictions to permit foreign individuals to purchase commercial property for investment purposes

Effective October 1, 1997, a recent amendment to the Swiss Federal Law Regarding the Purchase of Real Property by Foreign Persons of 1983 permits foreign individuals to acquire Swiss commercial real property for investment purposes.  With this amendment, foreign individuals may acquire office buildings, factories, hotels, and shopping centers.

The Swiss Parliament (Bundesversammlung der Schweizerischen Eidgenossenschaft) had approved the amendment on April 30, 1997, and issued it on May 13, 1997.

With the amendment, Article 2 of the Law provides that no permit is required if:

- "the property is the permanent location of a trade, for manufacture, or a business conducted according to commercial principles, a craftsmen's workshop, or for an independent profession;

- the property serves the purchaser, as a natural person, as the primary residence at the location of rightful and actual domicile; ..."

"Acquisition of real property" under the Law includes the participation in investment companies whose purpose is the purchase of property (Article 4).

The permit requirement for the purchase of vacation homes or a second residence remains in place.

Swiss banks and financial institutions expect substantial demand for such investment properties, particularly because of the Euro currency in the European Union.

Citation:  Bundesgesetz über den Erwerb von Grundstücken durch Personen im Ausland, 53 Bundesblatt, 149. Jahrgang, Bd. II, page 1494.

JURISDICTION

In action by State of Panama against BCCI and other banks, Eleventh Circuit upholds personal jurisdiction over defendant American banks as not exceeding Fifth Amendment limitations

The Republic of Panama sued several U.S. and international banking organizations, including BCCI Holdings S.A. (the parent corporation of BCCI S.A. and BCCI Ltd.) and First American Bank.  Panama alleged that the defendants had helped former Panamanian strongman Manuel Noriega to divert government funds to his own use.  In so doing, they had thus violated the Racketeer Influenced and Corrupt Organizations Act (RICO) [18 U.S.C.  § 1961].  Noriega allegedly had laundered the money through BCCI accounts and had channeled them through First American accounts.  In the U.S., all of BCCI's attachable assets have been forfeited and placed in a custodial account. 

The district court dismissed Panama's claims against First American Bank and another bank ("First American defendants") for lack of personal jurisdiction, and dismissed the claims for the remaining defendants on grounds of forum non conveniens.  Panama argued that the district court had jurisdiction over the First American defendants under RICO's nationwide service of process provision [18 U.S.C. § 1965(d)]. 

Panama appealed.  The U.S. Court of Appeals for the Eleventh Circuit reverses the dismissal of the claims against the First American defendants.

Following the Second Circuit, the Court first concludes that, if plaintiff asserts a not wholly immaterial or unsubstantial RICO claim, he or she can take advantage of RICO’s nationwide service of process provision.  In the instant case, however, the First American defendants had waived their chance to contest Panama's use of RICO's service provision. 

Second, the Court rules that the Due Process Clause of the Fifth Amendment provides an independent constitutional limitation on the court's exercise of personal jurisdiction over a domestic defendant served pursuant to a federal statute's nationwide service of process provision.

"A defendant's 'minimum contacts' with the United States do not, however, automatically satisfy the due process requirements of the Fifth Amendment...  Therefore, even when a defendant resides within the United States, courts must ensure that requiring a defendant to litigate in plaintiff's chosen forum is not unconstitutionally burdensome.  ...  We emphasize that it is only in highly unusual cases that inconvenience will rise to a level of constitutional concern.  ...  When a defendant makes a showing of constitutionally significant inconvenience, jurisdiction will comport with due process only if the federal interest in litigating the dispute in the chosen forum outweighs the burden imposed on the defendant.” [33-37]

Here, the First American defendants are large banking corporations who could conveniently litigate in Florida.  Therefore, there is no infringement of their Fifth Amendment interests in individual liberty. 

The Court, however, affirms dismissal on the alternative ground that Panama had failed to state a proper RICO claim against these defendants.  Specifically, Panama had insufficiently pleaded that the defendants knew of the illegal origin of the transferred funds and that they had acted with intent. 

Finally, the Court affirms the dismissal of the remaining defendants on forum non conveniens grounds.  Since most of their allegedly fraudulent acts took place in England and Luxembourg, one of their judicial systems would be more convenient than the U.S.

Citation:  Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 199 F.3d 935 (11th Cir.  August 20, 1997).

MARITIME LAW

In dispute over compensation for damaged cargo, Second Circuit finds that higher liability limitation, as provided in British carrier's bill of lading, does not offend COGSA

Construction equipment that the M/V “Seijin” carried from Antwerp, Belgium, and Southampton, England, to Baltimore was damaged during the voyage.  The carrier, Wallenius Lines, had given the clients (jointly J.C.B.) Datafreight Receipts (DFRs), marked "non-negotiable."  Each stated that it was a "contract of carriage."

The standard terms and conditions in the first DFR provided that carriage was subject to two sets of rules.  First, there were the Hague Rules [International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, August 25, 1924, 51 Stat.  233].  The second were the Hague Visby Rules [Hague Rules as amended by the Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, signed at Brussels, February 23, 1968, reprinted in 6 Benedict on Admiralty 1-25 to 1-29 (7th ed.  1997)].  The second and third DFRs, issued in Southampton, provided that Hague Rules apply but with a qualification.  The corresponding legislation in the country of shipment applies if that nation has not implemented the Hague Rules. 

The parties having stipulated to liability, the only issue was damages.  In the district court, Wallenius unsuccessfully tried to limit its liability to $500 per package, pursuant to the Carriage of Goods by Sea Act [46 U.S.C.  § 1300] (COGSA).  The district court found, however, that the parties had intended to apply higher damages limitations.  It thus awarded damages to J.C.B. based on the Hague Rules.  Wallenius Lines appealed. 

The U.S. Court of Appeals for the Second Circuit affirms.  COGSA is the U.S. implementation of the Hague Rules.  It generally limits liability for damage or loss of cargo to $500 per package.  The U.S. did not adopt the later Protocol that boosted liability to 10,000 Francs per unit.  Neither did the U.S. adopt a 1979 Protocol that provided for a damages calculation based on "special drawing rights," (SDRs).  These are fluctuating units of account determined by the International Monetary Fund [Protocol Amending the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, December 21, 1979, reprinted in 6 Benedict, supra, 1-32.2 to 1-32.5].  As a result, the $500 limit applies where COGSA controls. 

On the other hand, both Belgium and the United Kingdom have accepted the 1979 Protocol.  Applying the COGSA limitation, the damages here would total about $23,000.  Under the 1979 Protocol, however, the damages would add up to about $776,000.  Thus, the question is whether the language in the DFRs, that the “Hague Rules” apply as enacted in the country of shipment, includes the Hague Rules as amended by the Protocols.

Section 4(5) of COGSA [46 U.S.C. § 1304(5)] contains the $500 limitation but provides that the parties may fix another maximum amount by "agreement." In the lower court’s view, the contract of carriage was an "agreement" that incorporated the modified Hague Rules.  The Second Circuit agrees.  The United Kingdom has adopted the Visby Rules and the 1979 Protocol.  Several U.S. courts have held that a document incorporating the law of the shipping country adopts that country's interpretation of the Hague Rules.  The UK reads both the Rules and Amendments together.

Thus, according to the Hague Rules as enacted in the United Kingdom, the parties intended to have the higher liability limitation apply.  Finally, the higher limitation does not offend COGSA.

Citation:  J.C.B.  Sales Ltd. v. Wallenius Lines, Nos. 96-7621, 96-7661 (2nd Cir. August 21, 1997).

TELECOMMUNICATIONS

Mexico issues general guidelines for private investments in Mexican satellite communication systems

To increase private investments in the Mexican satellite communication systems and to restructure the system as a whole, the Mexican Government has issued General Guidelines.  The key elements are (1) public participation in government-run undertakings, and (2) licenses based on Article 29 of the Federal Tele-communications Law. Through announcements in the Official Gazette [Diario Oficial de la Federación], the Government will ask for proposals on the technical and commercial use of the satellite system.

The Guidelines set forth the requirements for such participation, including the posting of bonds.

The effective date of the Guidelines is June 19, 1997.

Citation: Bases generales para la apertura a la inversión privada en el sistema satelital méxicano, 1997 Diario Oficial de la Federación [Mexican Official Gazette], June 16, 1997.

TRADE

WTO Panel decision holds that European Communities' ban on meat from animals treated with growth hormones violated international trading rules

A Dispute Settlement Panel of the World Trade Organization (WTO) has held that the European Communities' (EC) ban on meat from animals that have been treated with certain growth hormones violates international trading rules.

[Several trade disputes that have arisen in recent years within the WTO system show the conflict of environmental and health concerns on the one hand, and trading rules on the other.  Currently, there are three sets of rules that may apply in the area of environment and health: (1) GATT 1994 Articles XX(b),(d), and (g), which provide exceptions to the other GATT articles.  (2) the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), and (3) the Agreement on Technical Barriers to Trade (TBT Agreement).  As for the TBT Agreement, there have been no WTO decisions so far.  Regarding Article XX, there have been several cases, including the recent "gasoline dispute" brought by Venezuela against the United States.  This was the first WTO dispute involving the SPS Agreement.]

A complaint brought by the U.S. and others had charged that the ban violated the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement).

This dispute concerns in particular Council Directive 81/602/EEC, Council Directive 88/146/EEC, and Council Directive 88/299/EEC.  Directive 81/602/EEC, for example, bans the administration to farm animals of substances having a thyrostatic, oestrogenic, androgenic or gestagenic action.  It also outlaws the marketing or slaughtering of farm animals to which these substances have been given or the selling of meat from such animals; the processing of meat from such animals and the marketing of meat products prepared from or with such meat.  The U.S. considers the six hormones in question safe.

In its Report circulated on August 18, 1997, the Panel found that the European ban on imports of meat and meat products from cattle treated with any of six specific growth hormones was inconsistent with the Sanitary and Phytosanitary Measures (SPS) Agreement.

After reviewing the evidence presented, as well as conducting extensive hearings, the Panel concluded that:

(i) By maintaining sanitary measures that do not rest on a scientific "risk assessment," the EC has acted inconsistently with Article 5.1 of the SPS Agreement.

(ii) When the EC adopted arbitrary or unjustifiable distinctions in the levels of sanitary protection it deemed suitable in different situations, it set up a discrimination or a disguised restriction on international trade.  This action does not square with the demands of SPS Article 5.5.

(iii) The EC had acted at odds with the stipulations of SPS Article 3.1 when it set up sanitary measures that are not based on existing international standards and lack scientific justification under Article 3.3.

Citation: EC Measures Concerning Meat and Meat Products (Hormones), Case WT/DS26/R/USA & WT/DS48/R/CAN, both available on the WTO internet site: www.wto.org; U.S. Trade Representative Press Release 97-76 (August 18, 1997).

[For a discussion of the WTO standards in cases where health or environmental rules conflict with international trade, see Mike Meier, GATT, WTO, and the Environment: To What Extent Do GATT/WTO Rules Permit Member Nations to Protect the Environment When Doing So Adversely Affects Trade?, 8 Colo. J. Int'l Envt'l L. & Pol'y 241 (1997)].

TRADE

Effective July 1, 1998, Russia issues new decree requiring proper labelling of imported products other than food

A new Russian decree, signed by Prime Minister Viktor Chernomyrdin and issued on August 15, 1997, requires that importers properly label all imported non-food products.  The decrees will ban all non-complying products starting on July 1, 1998.

Depending on the product, importers must provide the following information in Russian:

- Product name.

- Country of origin, manufacturer.

- Uses, basic properties and characteristics.

This information should be on the label or packaging of each item, or in instructional leaflets provided separately.

Based on this Decree, the State Committee on Standardization, jointly with several Ministries, will develop a technical labelling standard for all non-food products by January 1, 1998.

Citation: Government of the Russian Federation, Decree No.  1037 (August 15, 1997).  [An English translation of this decree is available from the U.S. Department of Commerce, Russian Desk, Phone: (202) 482-4655].

- WTO holds in favor of U.S. in trade dispute with India over intellectual property rights.  U.S. Trade Representative Charlene Barshefsky has announced that the WTO dispute settlement panel decided the dispute with India over intellectual property rights in favor of the U.S.  The U.S. had brought the case in July 1996 to challenge India's failure to protect such property rights.  After unsuccessful consultations, the WTO established a dispute settlement panel in November 1996.

According to a press release of the U.S. Trade Representative, the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) grants developing countries without current patent protections for pharmaceutical and agricultural chemicals a 10-year grace period to establish such legal protections.  In the meantime, they are to use a "mailbox" system where patent applications are received and assigned a priority date for processing [TRIPS Article 70(8)].  The receiving country must then determine whether the invention is new and involves an inventive step as of the priority date.  Also, the mailbox system requires that certain products receive exclusive marketing rights [TRIPS Article 70(9)].

Here, the WTO panel found that India had failed to implement the mailbox and exclusive marketing rights systems.  The panel also rejected India's claim that an (unpublished) administrative system for receiving such patent applications satisfied the TRIPS requirements.  This is the first intellectual property rights case decided by the WTO.  The panel report will become available in a few weeks. Citation:  U.S. Trade Representative press release 97-80 (September 5, 1997).  The panel report will become available on the internet site of the WTO at www.wto.org.

- Japan opposes new U.S. sanctions on certain Japanese vessels imposed by U.S. Maritime Commission. Beginning September 4, 1997, the U.S. Federal Maritime Commission (FMC) has imposed $100,000 per-voyage fees on certain Japanese vessels calling at U.S. ports [see 1997 Int'l Law Update 45].  The sanctions apply to three Japanese carriers every time their vessels enter a U.S. port from abroad.

According to a Japanese press release of the Foreign Minister, Yukihiko Ikeda, dated September 4, 1997, Japan and the U.S. have worked on improving the situation.  The Ministry of Transport is organizing discussion rounds to overcome the Japanese "prior consultation system" that allegedly puts foreign carriers at a disadvantage.

Under the "prior consultation system" applied by the Japan Harbor Transport Authority (JHTA), shipping lines have to get approval before changing their port schedules.  The European Union agrees with the U.S. position.  The EU notes that the JHTA, which also runs the stevedoring companies that load and unload ships, may grant or withhold docking authorizations on an arbitrary basis, and that prices of Japanese port operations are well above customary international levels. Citation: (Japan) Ministry of Foreign Affairs, Press Release (September 4, 1997) [available on the Internet at http://www.mofa.go.jp]; 62 Federal Register 9696 (March 4, 1997); European Union News press release No.  57/97 (September 5, 1997).

- U.S. and Laos conclude bilateral trade agreement. The U.S. and Laos concluded a bilateral trade agreement on August 13, 1997, to normalize economic relations between the two countries.  The agreement addresses, for example, U.S. market access for goods and services, the protection of intellectual property rights, non-tariff impediments to trade, investments, as well as the free transfer of capital, profits, and royalties.

Based on this agreement, and after Congress has lifted existing trade restrictions imposed on Laos, Laos may receive most-favored nation (MFN) status.  This is the first such trade agreement with a Southeast Asian nation.  The President will soon submit it to the Senate for its advice and consent. Citation:  U.S. Trade Representative Press Release 97-75 (August 15, 1997).

- Indian Supreme Court reaffirms power of judicial review. Earlier this year, the Supreme Court of India ruled that the power of review over legislative action was an "integral and essential" aspect of the Indian Constitution's fundamental structure.  According to the Court, even an amendment to the Indian Constitution can never deprive the High Courts or the Supreme Court of their powers to assess the validity of legislation. Citation: L.  Chandra Kumar v. Union of India, 3 S.C.C.  261 (1997) [based on article in 1997 Bull. Legal Devel. 174].

- United States and China enter into agreement on U.S. consulate in Hong Kong. As of July 1, 1997, China and the U.S. have entered into a treaty dealing with the maintenance of the U.S. Consulate General in Hong Kong.

The consular district will be coextensive with the Hong Kong Special Administrative Region.  The agreement exempts from local taxation both the Consulate and members of the staff who are not citizens of China.  The consulate may use any of the usual methods of communication except that it must get special permission to use a wireless radio.  Official correspondence of the consulate is to remain inviolable.  Consulate members and their families shall be immune from criminal prosecution.

Moreover, with specified exceptions, the performance of official functions shall also have immunity from Chinese civil or administrative jurisdiction.  Should Chinese authorities arrest and charge a U.S. citizen, a consular officer shall be able to visit the citizen and look to his legal and personal needs.

Finally, the Vienna Convention on Consular Relations is to regulate any matters not dealt with in the new treaty.  The parties have also agreed to a similar continuation of U.S. consular functions in Macau when China takes it over on December 20, 1999. Citation: China-United States: Agreement regarding the Maintenance of the U.S. Consulate General in Hong Kong, 36 I.L.M. 813 (1997).

- WTO Panel rules against EU as to its banana trade policies. Ecuador, Guatemala, Honduras, Mexico and the U.S. complained to the WTO that the EC regime for importing, selling and distribution of bananas violated GATT Articles I, II, III, XI and XIII, as well as other international trade agreements such as the General Agreement on Trade in Services (GATS).

The WTO Panel upheld the complaints in a Report issued on May 22, 1997.  The following month, the EU announced its intention to appeal certain aspects of this ruling.

On September 9, 1997, the Appellate Body released its report, upholding the Panel's conclusion that the EU banana regime violates WTO obligations.  The Appellate Body found, among other things, the following EU measures inconsistent with WTO trading rules:

- The EU assignment of import licenses for Latin American bananas to French and British companies, taking away a large part of the banana distribution from U.S. companies.

- The EU assignment of import licenses for Latin American bananas to European banana ripening firms, also taking away business from U.S. companies.

- The burdensome EU licensing requirements for imports from Latin American countries.

- The EU restrictions on access to its banana market.

The Panel and the Appellate Body, however, upheld the EU tariff preferences for Caribbean banana exporting countries.  They are permissible based on a WTO waiver given to the EU, allowing certain trade preferences for its former colonies. -- This is the first WTO case interpreting GATS. Citation: Complaints by Ecuador, Guatemala, Honduras, Mexico and United States (WT/DS27).  See also http://www.wto.org/wto /dispute/bulletin.htm.  [Derived in part from article in 1997 Bull. Legal Devel. 204]; U.S. Trade Representative press release 97-84 (September 9, 1997).