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 3 (March).

BANKING

Germany finalizes substantial new banking law that, among other things, extends supervision to "grey" capital market

On December 18, 1996, the German Federal Government published a new law to implement EU directives on banking and bonds.  The law will substantially revise the current Credit Institutions Law [Gesetz über das Kreditwesen (KWG)], and the Securities Trade Law [Wertpapierhandelsgesetz (WpHG)].  In addition to implementing EC directives 93/22/EEC [investment services in the securities field], 93/6/EEC [capital adequacy of investment firms and credit institutions] and 94/26/EEC [BCCI matters], it also contains provisions regarding the so-called "grey" capital market, money laundering, and the liquidity of the currency market.  As a result, credit institutions that had previously not been subject to supervision will now be subject to regulation.  In particular, the changes include:

- New definitions of credit "institutions" (§ 1).

- Capital reserve requirements (§ 10).

- Major loan regulation (§§ 13-13b).

- Protection of depositors (§ 23a)

- Organizational and management duties of credit institutions (§ 25a KWG).

With this law, Germany has implemented virtually all EU banking directives.  The effective date will probably be 1 August 1997.

Citation:  Entwurf einer Sechsten KWG-Novelle, 1997 Die Bank, Number 2, page 119. [German text of legislation submitted by Mr. Marcus C. Ehrhart, Attorney at Law, Munich and Berlin, Germany.]

CHOICE OF LAW

German High Court decides in dispute over collateralized bank loan involving purchase of Polish canned food that choice-of-law principles require application of lex rei sitae

In the following case decided by the German High Court (BGH), the plaintiff sought to recover from the defendant DM 1.8 million [about $980,000] that the defendant had received from DG-Bank based on a guarantee of payment.  The defendant was the bank of the food cannery "Z" (now bankrupt) with whom the plaintiff had been doing business since 1991.  In 1992, Z assigned certain accounts receivable to the defendant bank as collateral for its loans. 

Shortly thereafter, the plaintiff and Z concluded a contract for more than DM 7 million in canned food to be produced in Poland.  The contract required the plaintiff to buy an agreed amount of canned food.  The plaintiff gave the defendant bank a "guarantee of payment" (Zahlungsgarantie) provided by DG-Bank.  In case Z could not provide the goods, it would instead provide canned food of Polish company L of equal value.  In 1993, the defendant bank claimed and received a payment of DM 1,846,227.84 from DG-Bank.  Claiming that it never received the goods, the plaintiff argued that the defendant bank improperly received part of the guarantee payment.  The district court (Landgericht) denied the claim and the plaintiff unsuccessfully appealed.

The BGH reverses.  It rules that the lower court had erred in its application of the "German international law of chattel" (deutsches internationales Sachenrecht), and thus had mistakenly supposed that the plaintiff had obtained rights to the canned food produced by company L in Poland.  According to the choice-of-law jurisprudence of the BGH dealing with assignment of goods, the law of the place of storage applies.  Here, the assignment of the goods by Z to the plaintiff did not make domestic law applicable.

Where the goods are located abroad, the BGH has rejected such choice of law in the past, even in cases where it might have been the intent of the parties.  Most scholarly writings agree that in cases where the goods are located abroad, the law of the situs applies.  In such cases, there is no free choice of the applicable law.   Considerations such as (1) protecting creditors who have an interest in the goods, and (2) compatibility with international rules support the rationale of the situs rule

Therefore, the appeals court should have reviewed the effect of the assignment based on Polish law, as required by German international chattel law.  The court notes that, according to Polish private international law (Art. 24 § 1 and § 2 of the Law on International Private Law of 12 November 1965), that law of situs governs issues of the gain and loss of property.  Thus, under Polish private international law, Polish chattel law would apply.  Finally, the BGH chooses not to decide whether the plaintiff became the owner of the goods according to Polish law.

Citation:  BGH, Urt. v. 25.9.1996 - VIII ZR 76/95 (Nürnberg), 1997 NJW, Number 7, page 461. [German text of opinion submitted by Mr. Marcus C. Ehrhart, Attorney at Law, Munich and Berlin, Germany.]

COPYRIGHT

Mexico issues new law to protect copyright; to enter into force in March 1997

Mexico has published a new copyright protection law.  In particular, the purpose of the law is to protect the rights of authors, artists, editors, when their works are broadcast or used in any other form (Article 1).  The competent authorities for purposes of this law are the Federal Government through the National Institute for Authors' Rights (Ejecutivo Federal por conducto del Instituto Nacional del Derecho de Autor), and in special cases the National Institute for Industrial Property (Instituto Mexicano de la Propiedad Industrial) (Article 2).

Foreign authors or holders of rights enjoy the same protection as Mexican nationals, based on this law, other Mexican laws, and additional international agreements in this area (Article 7).

An "author" is defined as a person who has created a literary or artistic work.  Protected by the law are works in the areas of literature, music, drama, dance, drawings and paintings, sculptures, caricatures and cartoons, architecture, movies and other audiovisual works, television and radio programs, computer programs, photography, applied arts such as designs and textiles, as well as compilations of works, such as encyclopedias and anthologies, and other data collections that constitute intellectual creations.

Generally, the Mexican law protects such works for a period of 50 years.  There are, however, many restrictions and conditions.  For example, it covers non-original computer programs for only five years.  In contrast, the law protects "patrimonial" works during the author's life and for 75 years thereafter.

The effective date of the law is March 24, 1997.

Citation:  Ley Federal del Derecho de Autor, 1996 Diario Oficial de la Federación [Mexican Official Gazette], December 24, 1996.

EDUCATION

EU and U.S. agree to pursue more joint projects in higher education and vocational training

On October 23, 1995, the EU Council approved an agreement with the U.S. for cooperation in higher education and vocational training.  The Commission is now requesting proposals for approximately ten educational projects that multilateral groups can best carry out.

To receive EU funding, each plan must include EU or U.S. educational institutions.  They may embrace, for example, the development of exchange programs, innovative courses of study, intensive training courses, and teaching assignments.

The deadline for submitting proposals is May 16, 1997.

Citation:  Cooperation in higher education ..., 1997 O.J. of the European Communities (C 46) 4, 14 February 1997.  [Additional information is on the "Europa" internet server at http://europa.eu.int/en/dg22/dg22.html.]

EXTRADITION

In extradition of Swedish citizen to U.S. for insider trading, German High Court rules that, if suspect committed act before current Extradition Treaty entered into force, act must have been "criminal" in both U.S. and Germany at time it was committed

The U.S. sought to extradite Mr. N, a Swedish citizen, from Germany.  In 1989, N belonged to the Board of Directors of Asea Brown Boveri (ABB), with headquarters in Switzerland.  According to the charge, N learned that ABB was planning to take over Combustion Engineering, Inc. (CE).  N allegedly passed that information on to two of his business partners in New York and had them buy CE stock.

The competent court to decide the extradition request was the State Supreme Court (OLG) of Frankfurt a.M. It found that German law did not consider such insider trading a criminal offense in Germany at the time N had committed it.  Insider trading became an offense in Germany only with the Wertpapierhandelsgesetz (WpHG) of 26 July 1994 (1994 BGBl. I, page 1749).  An additional protocol to the U.S.-German Extradition Treaty entered into force on 11 March 1993.  It provided that the Treaty does not apply to acts committed before the protocol entered into force and that, at the time of their commission, were not offenses under the laws of both Contracting Parties.  Therefore, the crucial question for an extradition under the U.S.-German Extradition Treaty is whether the offense must be "criminal" at the time it is committed, or at the time of the extradition request. 

The German High Court (BGH), holds that the Treaty allows extradition to the U.S. for activity that the suspect took part in before the protocol to the Extradition Treaty entered into force on 11 March 1993.  Under the principle of "dual criminality," however, it must have been "criminal" in both the U.S. and Germany at the time it was committed.  The Court refers to a memorandum of the U.S. Department of State.  The memo explains that Article 31 of the Extradition Treaty "establishes the retroactive effect of the treaty with the caveat that the offense must have been an offense under the laws of both countries at the time of its commission."

In this case, N committed his allegedly wrongful acts in 1989 but they did not become an offense in Germany until 1994.  Thus, the Treaty does not allow N's extradition to the United States on these charges.

Citation:  BGH, Beschl. v. 17.9. 1996 - 4 ARs 21/95 (Frankfurt a.M.), 1997 NJW, Number 8, page 533. [German text of opinion submitted by Mr. Marcus C. Ehrhart, Attorney at Law, Munich and Berlin, Germany.]

Third Circuit reverses grant of habeas corpus to Turkish extraditee because there is probable cause based on reversal of acquittal under Turkish law

In 1970, Mehmet Semih Sidali allegedly raped and killed a 15-year-old girl who lived in the same house with his family in Mersin, Turkey.  The trial court acquitted him.  In Turkey, however, the prosecutor may appeal an acquittal to the Supreme Court of Appeals if a "violation of the law" has occurred.  After several proceedings, the so-called General Board annulled Sidali's judgment of acquittal.  A few days later, Sidali applied for, and received, a Turkish passport, and came to the U.S.  Turkey requested his extradition in 1982.  It was not until 1994 that the U.S. filed an extradition complaint on behalf of Turkey.  A U.S. federal court issued a Certification of Extraditability.  Sidali, however, successfully petitioned the U.S. district court for habeas corpus on the grounds that there was no probable cause to believe that he was guilty of the murder.

The U.S. Court of Appeals for the Third Circuit reverses, finding that Sidali may be extradited because the requirement of probable cause has been satisfied.

The right of a sovereign to demand and obtain extradition of an accused criminal is created by treaty, and in the absence of a treaty the government has no duty to surrender the fugitive.  The U.S.-Turkey extradition treaty [T.I.A.S. No. 9891] provides for reciprocal extradition of persons.  Rape and murder are extraditable offenses under the treaty.

In response to a complaint that a person has committed an extraditable offense, the court conducts a limited inquiry to determine whether to surrender the fugitive.  The power to extradite derives from the President's power to conduct foreign affairs, and it is thus an executive - not a judicial - function.  Basically, a court determines whether there is probable cause to believe that the defendant is guilty of the crimes charged.  If the evidence is sufficient, the court finds extraditability and certifies the case to the Secretary of State.  Because that is not considered a final decision of a court, only then can the defendant seek a writ of habeas corpus (which Sidali did).

The government argued (1) that Sidali was actually convicted of the crimes, and (2) that the evidence on the record was sufficient to find probable cause.

As to whether Sidali had actually been convicted, the Court examines Turkish criminal law and procedure.  Here, the General Board later reversed Sidali's acquittal.  Under the Turkish Code of Criminal Procedure (Article 326), the General Board's determination of guilt is final and binding.  The reversal of the acquittal is final and the case is remanded for sentencing only.  In other words, it is a conviction under Turkish law.  Even though the General Board never used the word "conviction," its statements are unequivocal.  Use of the word "conviction" is not necessary to show that a conviction has occurred.  In addition, an explanatory note from the Turkish Embassy points out that a trial court cannot question the General Board's decision.

Furthermore, the facts in the record support probable cause.  At the time the crime was committed, Sidali was the only male person in the house.  A "hostile attack dog" guarded the house and there were no signs of forced entry.  Sidali's pajamas were bloody.  Even though that evidence is not overwhelming, a "perfect" investigation is not necessary.  Both the reversal of the acquittal and the facts in the record independently support Sidali's extraditability.

Citation: Sidali v. Immigration and Naturalization Service, No. 96-5215 (3rd Cir. February 24, 1997).

JURISDICTION

English Court of Appeal allows domiciliary to defend against enforcement of Arizona judgment since unclear that Arizona court had decided specific jurisdictional point against defendant

Daniel Hill, a Canadian citizen, invested in a real estate limited partnership (the Partnership) in Arizona.  In 1990, Desert Sun Loan Corporation (DSLC) sued the partnership in Arizona for the amount due under a promissory note (the Note).  DSLC also named Hill, who had since become a domiciliary of England, as a guarantor of the Note.  DSLC had issued process to the attorneys for the Partnership, who purported to accept service for Hill. In 1992, DSLC prevailed in that litigation.

Later on Hill hired another attorney who moved to vacate the Arizona judgment for lack of personal jurisdiction over Hill, contending that he had not been properly served with process.  In particular, Hill argued that the attorneys for the Partnership had lacked authority to accept process for him.  The Partnership's attorney, however, certified as to his acceptance of process on behalf of the Partnership.  Ultimately, the court rejected Hill's motion on the grounds he had authorized an attorney to enter a general appearance on his behalf.

DSLC then filed suit against Hill in England to enforce Hill's share of the Arizona judgment. Hill challenged the jurisdictional basis of the judgment.  Plaintiffs argued that issue estoppel prevented Hill from again raising a jurisdictional point he had raised and lost in the rendering court and that, in any event, Hill lacked a meritorious defense.  From a lower court ruling denying their summary judgment request, plaintiffs appealed.

The English Court of Appeal divides the case into three issues: (1) express authorization, (2) issue estoppel, and (3) whether to require Hill to post a bond against the judgment as a condition of proceeding with this appeal.

As a threshold issue, the Court inquires whether Hill by transatlantic phone had expressly authorized Mr. Graham [another guarantor of the Note] to instruct the American attorney to accept service and also to enter an appearance on his behalf in the Arizona proceedings.  The court places the burden of proof on the plaintiffs to show that Hill gave his express authorization Detecting an area of factual dispute between Graham and Hill, the Court finds that the plaintiffs have not sufficiently shown express authorization to warrant summary disposition at the interlocutory stages. 

The Court next turns to issue estoppel.  The court asks whether Hill's appearance in the Arizona courts to challenge the Arizona courts' exercise of in personam jurisdiction over him precludes his making this argument now.  Under English law, a prior interlocutory judgment in a foreign proceeding adverse to a party can give rise to an issue estoppel where the party had expressly raised a procedural or jurisdictional issue and the foreign court had decided the specific issue, with due practical consideration of whether the issue was, or should have been, "fully ventilated" before the foreign court. 

In this case, however, the Court of Appeal concludes that it is not clear enough for summary judgment that the Arizona court had determined the precise issue Hill is now raising as to the authorization for the law firm to represent him in the Arizona proceedings.  Thus, upon payment of a bond, Hill may have conditional leave to defend plaintiffs' action to enforce the Arizona judgment.

Citation: Desert Sun Loan Corporation v. Hill, [1996] 2 All ER 847 (Eng. Ct. App., 1996).

JURISDICTION (PERSONAL)

French Cour de Cassation rejects arguments based on applicability of Brussels Convention of 1968 and upholds jurisdiction of French courts over Guggenheim Foundation of New York in dispute over art collection in Venice

Two French descendants of Peggy Guggenheim domiciled in France brought an action against the Solomon R. Guggenheim Foundation of New York City in the Paris court of first instance.  The litigation concerned a Venetian palace which housed an art collection donated by Peggy Guggenheim.  Plaintiffs sought a court order that the Foundation restore the building and collection to the condition the original donor had in mind and pay damages for its failure to maintain the institution as intended by its donor.  The lower French courts denied the Foundation's motions to dismiss the case against it for lack of jurisdiction and it appealed to the Court of Cassation.

Article 2 of the Brussels Convention of 1968 on Jurisdiction and Judgments provides: "Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State."  Article 5, ¶ 5 provides: "A person domiciled in a Contracting State may, in another Contracting State, be sued: ... as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts for the place in which the branch, agency or other establishment is situated."  Article 16-1 provides in relevant part: "The following courts shall have exclusive jurisdiction, regardless of domicile: (a) in proceedings which have as their object rights in rem in, or tenancies of, immovable property, the courts of the Contracting State in which the property is situated."

The Court of Cassation dismisses the appeal.  First, the Court finds no merit in the argument that, since the litigation to some extent concerned real property located in a Contracting State, only the Italian courts would have jurisdiction over this case under the Convention.  In the Court's view, this is a personal action in which rights in real property are not at issue.  Thus, Article 16-1 does not apply.

The Court also concludes that the Foundation had its registered office (siege social) in New York City.  It rejects the argument that the Foundation had set up a "secondary" registered office in Italy, a party (as is France) to the Brussels Convention, because the Convention does not contemplate such a "secondary seat."  Nor has the Foundation shown that the law of New York would allow the Foundation to have a secondary seat in a foreign country where it has goods.  Finally, it has not established that its mere registration as a company doing business in Italy makes it a "domiciliary" of that Brussels Convention state.  Not being a domiciliary of any Contracting States, Articles 2 and 5-5 of the Convention do not apply.  [Apparently the Court upholds jurisdiction over this American defendant under Article 14 of the French Civil Code.  It provides, in part, that the French courts may call an alien before them to litigate obligations contracted by the alien with a French citizen in a foreign country.]

Citation: Pourvoi No. 94-12.428, Cour de Cassation (1ère Chambre Civile, 3 Juillet 1996)

In litigation arising out of death in Mexican auto-truck collision, Fifth Circuit unable to find basis for specific or general personal jurisdiction over Mexican trucker

In November 1991, Carol Hoffman Stein died in a head-on collision in Mexico between her car and a tractor-trailer owned and operated by Transportes Lar-Mex, ("Lar-Mex"), a Mexican corporation.  About two years later, her son, Christopher Felch, filed suit in a Texas court against Lar-Mex for the wrongful death of his mother.  After Lar-Mex removed to federal court based on diversity of citizenship, it filed a motion to dismiss based on lack of personal jurisdiction.  The district court, however, denied the motion.  Thereafter, Lar-Mex refused take part in the litigation on the merits and to appear at the pretrial conference.  Whereupon the district court entered a default judgment against it for $1,120,592. 

In reversing for entry of judgment in favor of Lar-Mex, the U.S. Court of Appeals for the Fifth Circuit holds that the trial court lacked both specific and general jurisdiction over Lar-Mex. 

As to whether Lar-Mex had enough contacts with Texas to warrant the exercise of specific personal jurisdiction, the Court must determine whether the present litigation resulted from injuries arising out of, or related to, the non-resident defendant's contacts with the forum state of Texas.  "[T]he following facts are undisputed:  (1) the fatal accident underlying Felch's cause of action occurred . . . in Mexico;  (2)  Carol Hoffman Stein . . . died in Mexico;  and (3) all of the defendant's negligence, if any, occurred in Mexico.  These facts preclude a finding that the instant litigation resulted from injuries arising out of or related to contacts between Lar-Mex and Texas."  [slip op, 5201].

In order to show general personal jurisdiction, there must be a showing of continuous and systematic contacts between the nonresident and the forum state.  Lar-Mex has no office, agents or employees in Texas nor does it advertise there.  It picks up no merchandise in Texas and only sporadically delivers shipments there.  "In the present case, Felch failed to provide any evidence [at the hearing] ... that Lar-Mex's transportation of goods across the border and into Laredo, Texas, was sufficiently substantial such that the exercise of jurisdiction on a general jurisdiction basis comported with the requirements of the due process clause."  [slip op, 5206].  All in all, the Court cites twelve specific factors, derived from deposition testimony, establishing that Lar-Mex lacked sufficient contacts with Texas.

Citation: Felch v. Transportes Lar-Mex SA, 93 F.3d 220 (5th Cir. 1996).

In Michigan company's action for misappropriation of glass plant technology against European companies, Sixth Circuit finds no personal jurisdiction because all alleged tortious acts occurred in Europe

International Technologies Consultants, Inc. (ITC), a Michigan consulting firm, assisted several French, Swiss and Austrian parties (jointly Euroglas) in developing plans for a "float glass" manufacturing plant in France.  With a "float glass process," molten glass is floated on liquid tin before it is cut to size.  A British company developed this technology and still owns, operates or licenses most float glass plants.

The story began in 1984, when the Managing Director of ITC approached the chairman of a Swiss glass company about building a plant in the U.S.  The Swiss company was interested and starting paying ITC for its services, which was considered money "paid ... in the USA for tax purposes."  The parties signed a "letter of intent" in Switzerland and provided that the place of "jurisdiction ... is Berne, Switzerland, and it will be interpreted under Swiss law."  ITC, in turn, hired Stewart Engineers & Consultants (Stewart) to provide technical support.  Shortly thereafter, a third party sued Stewart for misappropriation of "float glass" technology.  That lawsuit caused the Swiss company to abandon its plans of building a plant in the U.S.  The parties amended the agreement twice to provide that ITC and Euroglas would develop a new design and build a plant in France.

The agreement expired in 1992.  ITC alleged that Euroglas misappropriated the plant design and brought an action in Michigan federal court.  The district court, however, found that Euroglas' contacts with Michigan were tenuous and that forcing it to litigate in a Michigan forum would deny it "substantial justice."  All alleged tortious acts occurred in Europe.  ITC appealed from the court's dismissal for lack of jurisdiction.

The U.S. Court of Appeals for the Sixth Circuit agrees with the district court, and explains.  A federal court sitting in diversity may not exercise jurisdiction over a defendant unless state law authorizes the courts of the forum state to do so.  Such an exercise of jurisdiction must also be compatible with constitutional due process requirements.  Where, as here, there has been no evidentiary hearing to resolve apparent factual questions, the plaintiff need only make a prima facie showing of personal jurisdiction.  Mich.Comp. Laws 600.715(1) and (2) permits jurisdiction over a corporation or its agent if business was transacted or if acts done in Michigan later resulted "in a tort action."  These statutes, however, depend also on constitutional requirements.

For this review, the Court compares the facts of Int'l Shoe Co. v. State of Washington, 326 U.S. 310 (1945), to the case at bar.  The key issue here is whether the defendants' conduct and connection with Michigan are such that they should reasonably anticipate being haled into court there.  By the terms of the agreement, the forum was Switzerland.  Furthermore, the tortious character of the defendants' alleged conduct depends on the proper interpretation, under Swiss law, of the agreement concluded in Switzerland. It establishes jurisdiction in Switzerland.

The interests of Michigan are minor.  It is insignificant for purposes of personal jurisdiction that under the agreement all payments are "payments made in the U.S." for tax purposes.  Neither do the defendants' contacts with ITC by telephone, mail and fax support personal jurisdiction.  The only reason for these communications was that ITC found it convenient to have its location in Michigan.  Presumably, the defendants would have communicated with ITC even if it had been located elsewhere.  From the defendants' perspective, ITC's location in Michigan was purely fortuitous.

Finally, personal jurisdiction also fails under the tripartite jurisdictional test of Southern Mach. Co. v. Mohasco Indus., Inc., 401 F.2d 374, 381 (6th Cir. 1968).  Under Mohasco, the three prerequisites for in personam jurisdiction are:  "First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state.  Second, the cause of action must arise from the defendant's activities here.  Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable." 401 F.2d at 381.  Here, the Court finds that none of the factors applies.

Citation: Int'l Technologies Consultants, Inc. v. Euroglas S.A., No. 94-1200 (6th Cir. February 20, 1997).

TELECOMMUNICATIONS

Mexico and the U.S. conclude treaty on satellite communications

The Mexican Official Gazette has published the treaty concluded between Mexico and the U.S. with regard to satellite signals. [See related article on the conclusion of a protocol to the treaty in 1996 Int'l L. Update 145.]

The purpose of the treaty is (1) to facilitate commercial satellite services in and between Mexico and the U.S., (2) to license according to the rules of the international telecommunications union UIT, and (3) to enable license holders to operate in both countries.  Satellites may be used to receive and broadcast information in both countries (Article 4).  If foreign property is involved in such uses, it is subject to the national laws of the country where it is used.  For example, in Mexico foreign property and copyright claims are subject to Article 12 of the Federal Communications Law of 1995 (Ley Federal de Telecomunicaciones), as well as the Investment Law of 1993 (Ley de Inversión Extranjera).

The competent authorities for purposes of this treaty are:  for Mexico the Secretary for Communications and Transport (Secretaría de Comunicaciones y Transportes), and for the U.S. the Department of State.  The treaty will enter into force after both countries have notified each other that the treaty has been implemented into national law according to national requirements.

Citation:  Decreto de promulgación del tratado ... relativo a la transmisión y recepción de señales de satelites para la prestación de servicios satelitales a usuarios, 1996 Diario Oficial de la Federación [Mexican Official Gazette], November 8, 1996.

TRADE

Azerbaijan issues new decree to liberalize its foreign trade regime

With a new presidential decree, Azerbaijan has set up a framework for regulating foreign trade.  The new decree replaces several previous restrictive laws and regulations and opens up trade.  No other trade restrictions exist than the ones in this decree.  In particular, the decree provides:

- Import:  All imports that do not require special licensing must be recorded with the local customs agencies.  The prices in the contract must conform to the general import price regulation of the Ministry of Foreign Economic Relations, or require special approval.  Parties may not make advance payments for imported goods and services, except in special cases that the Ministry must approve.  Instead, they must use irrevocable letters of credit as the instrument for payment.

- Export:  The decree allows export contracts only with advance payment or an irrevocable letter of credit.  It also establishes a list of goods designated for direct export only with cash payment. The products include petroleum and petroleum products, electrical energy, metals and cotton.  Parties may export unlisted goods under a credit or consignment arrangement if they have properly registered the contract.  A company that is 30% or more government-owned registers with the Ministry; other companies register with the local customs agency.  In the case of consignment export contracts, all exporters must complete the sales within 180 days or recover all of the exported goods.  If a government-owned company produces the goods and a non-government company exports them, the exporter must pay the contract value before the export occurs.

- Barter:  Parties must register their barter contracts with the Ministry and the local customs agency.  They must complete such transactions within 90 days.

- Controlled goods:  The decree has a separate list of especially controlled and licensed goods.  They include weapons and other military equipment, radioactive materials, narcotics, as well as toxic chemicals.  The decree also lists goods and services that require the Ministry's registration and approval before they can be traded internationally.  They include certain wild plants and animals, archeological bones, inventions and the results of scientific research, works of art, pesticides, veterinary medicine, construction services, and legal services.  Companies that trade in alcoholic beverages also require a license from the Ministry.

U.S. companies that export to Azerbaijan must present certificates of origin and product descriptions.  Following the submission of the documentation to the Ministry, the registration of the contract shall take three days and the local customs agency must process the customs authorization within 24 hours.

The effective date of the decree was December 17, 1996.

Citation: Azerbaijan Decree on further development of foreign trade regulation. [For more information on the new decree, contact the U.S. Department of Commerce, Russian Desk, at (202) 482-2296, or 482-4655; FAX: (202) 482-2293.]

U.S. imposes trade sanctions on Argentina for failure to protect U.S. intellectual property rights

On January 15, 1997, the U.S. Trade Representative announced that the U.S. would withdraw 50 percent of the trade benefits granted to Argentina under the U.S. Generalized System of Preferences (GSP).  Thus, the U.S. will withdraw duty-free benefits for Argentine import products worth approximately $260 million.  According to Argentine officials, the U.S. has taken this action to penalize Argentina for failing to meet U.S. demands regarding the protection of U.S. intellectual property rights.  Current Argentine law allegedly meets all requirements of the WTO agreement on intellectual property rights.

The U.S. Trade Representative has published a notice in the Federal Register on January 21, 1997, requesting public comments on which Argentine products should be excluded from GSP treatment.  According to the notice, Argentina has failed to provide adequate and effective means to protect foreign intellectual rights.  Therefore, the President is planning to withdraw fifty percent of Argentina's benefits under the Generalized System of Preferences (GSP) program.  The GSP program grants duty-free treatment to certain articles imported from designated developing countries, based on Title V of the Trade Act of 1974 (19 U.S.C. 2461).  The GSP subcommittee is inviting comments on which products should be affected.  See 62 Federal Register 3072 (January 21, 1997).

Citation: Argentina Trade & Investment News, Vol. 4, No. 1 (January/February 1997).

U.S. and South Africa conclude agreements on education and double taxation

During his visit to South Africa, U.S. Vice President Al Gore has reached several agreements with Deputy President Thabo Mbeki in the framework of the binational commission.  The agreements include:

-  The establishment of a binational Fulbright Commission to expand educational exchange, and to support the Mandela Economic Scholarship Program that places historically disadvantaged South African students in U.S. schools.

- Inclusion of South Africa in the "Global Learning and Observations to Benefit the Environment (GLOBE) program."  GLOBE is a school-based, international science and education program of 44 countries to inform students of environmental measurements such as rainfall, water acidity, and soil moisture.  The information is exchanged via the internet.

- A bilateral tax treaty to facilitate mutual trade, and to eliminate double taxation.

Citation:  Press releases of the Office of the Vice President of February 17, 1997.  [Additional information will soon be available on the website of the U.S.-South Africa Binational Commission at http://www.usia.gov/regional/bnc/

usafrica.  With the assistance of the U.S. Agency for International Development, South Africa launched its first environmental homepage including laws and regulations, which is at http://www.ru.ac.za/departments/law/SAenviro/saep.html.]

- Gazette publishes new data on the Hague Service Convention:  The German Federal Gazette has published recent changes that affect the 1965 Hague Service Convention.  (1) The Convention entered into force for Poland on September 1, 1996.  (2) China has designated as its competent authority:  Bureau of International Judicial Assistance, Ministry of Justice, 26, Nanheyan, Chaowai, Chaoyang District, Beijing, P.C. 100020, People's Republic of China.  (3)  The competent authority in Spain is:  La Dirección General de Codificación y Cooperación Jurídica Internacional, Ministerio de Justicia e Interior.  (4)  The competent authority in the Slovak Republic is:  Ministerstvo spravodlivosti Slovenskej republiky, Zupnnmestie 13, 813 11 Bratislava, Slovak Republic.  Citation:  1996 [German] Bundesgesetzblatt II, page 2531.

- U.S. and Canada issue joint statement regarding Pacific Salmon dispute:  So far, the U.S. and Canada have not been able to agree on the implementation of the Pacific Salmon Treaty signed in 1985.  On February 5, 1997, the U.S. and Canadian governments announced that, to resolve the Pacific Salmon dispute, they have agreed on a process of government-to-government negotiations with direct participation of affected parties.  A preliminary review is expected in mid-March.  Citation: U.S. Department of State press release (February 5, 1997).

- U.S. and Chile sign Fulbright and Library of Congress agreements:  The U.S. and Chile have signed an agreement to make Chile a full partner in the Fulbright scholarship program.  Chile will increase its contributions to the program budget to $1 million.  The Library of Congress-Chilean National Library agreement will broaden research opportunities.  For example, both libraries will exchange bibliographic data electronically.  Citation:  U.S. Department of State press release (February 26, 1997).

- U.S. and China reach 4-year textile trade agreement:  On February 2, 1997, the U.S. and China reached a 4-year agreement for textile trade that generally extends current quotas for Chinese exports to the U.S., but reduces quotas in areas of repeated transshipment violations.  It also provides market access in China for U.S. textiles.  After Mexico and Canada, China is the third largest supplier of textiles and apparel to the U.S.  Citation:  Office of the U.S. Trade Representative press release, No. 97-07 (February 2, 1997).

- European Union puts out list of U.S. establishments approved for exporting beef to the EU:  The Commission has published a list of meat-processing establishments in the U.S. that EU has approved for exporting fresh meat products to its members.  The list specifies each U.S. establishment along with the specific meat products that it may export to the EU.  Citation:  1997 O.J. of the European Communities (C 49) 19, 19 February 1997.

- Sixty-nine WTO members conclude telecommunications agreement:  69 members of the World Trade Organization have concluded a telecommunications agreement that is intended to open telecommunications markets and to cut rates for consumers.  The agreement specifically addresses voice telephony, data and fax transmissions, as well as radio and satellite communications.  The estimated value of the telecommunications market is more than half a trillion U.S.$.  The agreement will enter into force on February 5, 1998.  Additional information on the agreement is at the WTO's WWW site at http://www.wto.org.

The U.S. Trade Representative has issued a background statement on the agreement, which is available from the press office, Phone: (202) 395-3000 or (202) 395-3350.  Citation:  WTO press release, 17 February 1997 (PRESS/67); Financial Times, February 17, 1997, page 1.