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.

2001 International Law Update, Volume 7, Number 4 (April).

  

AVIATION

Eleventh Circuit rules that, despite absence of Jamaica’s formal ratification of Warsaw Convention since its independence in 1962, that nation’s active participation in other international aviation agreements supports presumption that it remains party to Convention as it had been during colonial period

Willis Blake, a U.S. national who lives in Jamaica, started a round-trip flight on American Airlines from Jamaica to Connecticut on December 27, 1995. In Miami, Blake changed aircrafts and went on board America Airlines Flight 1480 headed to Hartford. When he found out that there would be a ground delay, Blake went to the lavatory and smoked a cigarette. When questioned about it, Blake admitted that he had done so. The captain and the pilot demanded that Blake get off the plane right away.

After three refusals, the pilot physically removed Blake from his seat, causing Blake to injure his head on the overhead storage compartment. After an overnight hospital stay, Blake took his trip and got back home to Jamaica toward the end of January 1996.

On August 19, 1999, about three and a half years after the incident, Blake sued American Air Lines for damages in a Florida state court. Defendant removed the case to federal court. The latter then gave summary judgment to defendant on the grounds that plaintiff had filed his suit after the running of the two-year limitation period in the Warsaw Convention for the Unification of Certain Rules Relating to International Transportation by Air, 49 Stat. 3000, T.S. 876, 137 L.N.T.S. 11 (1929) reprinted in note following 49 U.S.C. Section 40105. Plaintiff thereupon took an appeal. The U.S. Court of Appeals for the Eleventh Circuit, however, affirms.

Article 29(1) of the Convention extinguishes the right to damages if plaintiff does not sue within two years from the passenger’s arrival at his or her destination. The Convention applies to “international transportation” which covers plaintiff’s trip from Jamaica to the U.S. and back. The question, however, remains whether Jamaica was a High Contracting Party to the Convention at the time of the incident. The U.K. had adopted the Convention on its own behalf and on behalf of its colonies in 1934. The Carriage by Air (Parties to Convention) Order, 1999 lists the colony of Jamaica as a High Contracting Party to the Convention as of March 3, 1935. The crucial issue then is whether Jamaica lost that status when it secured its independence from the U.K. in 1962.

Since the conduct of foreign affairs is more of a political (rather than a judicial) function, the intentions and conduct of the nation in question are critical. This is especially so where, as here, Jamaica has never formally ratified the Warsaw Convention. Nor has the U.S. State Department taken a position on whether Jamaica today is a party to the Convention.

“Jamaica's conduct in respect to the Warsaw Convention, however, indicates its clear intent to adopt the Convention's privileges and obligations. First, upon gaining its independence from the U.K., Jamaica agreed that ‘the newly independent State would assume all Treaty obligations and rights relating to it entered into on its behalf prior to independence by the British Government....’ Report of the Jamaica Independence Conference 12‑13 (1962).”

“By taking this position, Jamaica created a presumption that it intended to be bound by the Warsaw Convention, which the UK had entered into on Jamaica's behalf when it had signed the Convention in 1934. (Cit.) Beginning with the presumption that Jamaica intended to remain a High Contracting Party after gaining its independence from Great Britain, we next note that Jamaica has never taken formal steps to denounce the Convention, although the Convention provides that ‘[a]ny one of the High Contracting Parties may denounce this convention by a notification addressed to the Government of the Republic of Poland.’ Warsaw Convention art. 39(1).” [Slip op. 2]

Of course, the Court admits, there is a negative implication raised by Jamaica’s failure to expressly ratify the Convention. After all, it did so with respect to 88% of the multilateral treaties deposited with the United Nations which the U.K. had negotiated on colonial Jamaica’s behalf. The Court sees the positive inferences, however, as more compelling.

“Specifically, Jamaica has taken an active role in negotiations to amend the Warsaw Convention, as evidenced by its participation in the Guatemala Protocol (now known as the Montreal Protocols) to amend the Convention, and its certification of the Guadalajara Convention, the terms of which expressly supplement the Warsaw Convention. (Cit.) Moreover, Air Jamaica, at a time when it was wholly‑owned by Jamaica, asserted the Warsaw Convention as a defense to a lawsuit in a United States court. (Cit.) These actions are consistent with an intent to adopt the obligations and privileges of the Convention and we hold, therefore, that Jamaica is a High Contracting Party to the Warsaw Convention.” [Slip op. 3]

Citation: Blake v. American Airlines, Inc., 2001 W.L. 264978 (11th Cir. Mar. 12, 2001).

CHILD ABDUCTION

Eleventh Circuit dismisses mother’s appeal involving Hague Child Abduction Convention as moot where, after district court ruling in his favor, father had promptly removed child to Israel

Lionel and Bettina Bekier married in France in 1990. Their only son, Jonathan, was born in France and became the subject of a custody battle between the parents upon their divorce in 1994. The French divorce decree awarded temporary physical custody to Lionel. While the final custody determination was pending in France, Lionel, with Bettina’s consent, took Jonathan to Israel. While they were in Israel, the Rabbinical Court of Tel Aviv gave custody to Lionel. In 1995, Bettina took Jonathan to France and later to New York and South Florida.

For several years, Lionel did not know Jonathan’s whereabouts. In 1998, Lionel decided to invoke the Hague Convention on the Civil Aspects of International Child Abduction [October 25, 1980, T.I.A.S. No. 11670, 19 I.L.M. 1501, codified at 42 U.S.C. Section 11601]. Israel and the U.S. are parties to the Convention. In 1999, a private investigator located Bettina and Jonathan in South Florida. Lionel then filed a petition in a Florida federal court asking for the child’s return to Israel under the Convention and 42 U.S.C. Section 11601.

The U.S. district court found that Bettina had wrongfully removed Jonathan from his habitual residence in Israel and ordered the child to be given to Lionel for return to Israel. Bettina filed a timely appeal but failed to post the required $100,000 bond. A few months later, Lionel took Jonathan back to Israel. The U.S. Court of Appeals for the Eleventh Circuit considers Bettina’s appeal moot. Under the mootness doctrine, if an event occurs during the pendency of an appeal that makes it impossible for the court to grant any effective relief to the prevailing party, the court has to dismiss the appeal.

The Court points out that the limited purpose of the Hague Convention is to determine which state has jurisdiction to resolve the underlying custody dispute and to secure the prompt return of children wrongfully removed or retained. The Convention, however, gives no guidelines for determining custody, leaving that determination to the laws of the proper forum state.

Here, Lionel had already obtained the relief requested in his Hague Convention petition in Florida federal court, and he had promptly returned to Israel with Jonathan. Thus, the Court can offer Bettina no effective relief at this point. She asked the Court to reverse or to remand for a further evidentiary hearing, but Jonathan is no longer in the U.S. Therefore, Bettina’s remedies, if any, seemingly lie in the Israeli courts.

“[Bettina] argues that ‘to dismiss this appeal for mootness defeats the spirit and the explicit intention of the Hague Convention.’ [Cit.] And we understand that our decision to some degree conflicts with the purposes of the Convention: to prevent parents from fleeing jurisdictions to find a more favorable judicial forum and to return children to their habitual residence in a timely fashion. But the United States Courts are restricted by the jurisdictional doctrine of mootness. Given our duty to respect the limits of our judicial authority, we will not create a ‘live’ case or controversy in an effort to promote the spirit of the convention.” [Slip op. 11]

Citation: Bekier v. Bekier, 2001 WL 376403 (11th Cir. April 16, 2001).

ENVIRONMENTAL LAW

EU issues new Directive on genetically modified organisms (GMOs) which includes, inter alia, legal definitions as well as requirements for notification, tracking and specific labeling

On February 16, 2001, the European Parliament and the Council of Ministers adopted a major overhaul of European requirements for genetically modified organisms (GMOs). Directive 2001/18/EC on the release into the environment of genetically modified organisms aims to control the use and release of such organisms in food, medicine, feed and seed. It repeals the previous directive on the same subject, Directive 90/220/EEC. The Member States have until October 17, 2002 to transpose the Directive into national law.

The Directive defines “Organism” as “any biological entity capable of replication or of transferring genetic material.” (Article 2). It also describes in detail what it considers “genetic modification.” It includes the formation of new combinations of genetic material by inserting nucleic acid molecules and cell fusion. (See Article 2 and Annex I A, Annex I B).

The purpose of the Directive is to control such organisms better (1) through mandatory labeling, (2) by monitoring (for example through public registers where GMOs are used and released), and (3) through increased expert consultations. The Directive, however, contains an exemption for pharmaceutical research.

The Directive essentially sets up a general notification and tracking system for GMOs, similar to those for hazardous chemicals and pesticides. A party planning to use or release GMOs must first carry out an environmental risk assessment (Article 4), and then notify a designated government agency in the EU Member State where the release will occur (Article 6). The notification must include, for example, a technical dossier, the conditions of release, and a plan for monitoring (see Articles 6 and 13). Also, parties must properly label all products containing GMOs unless the GMOs content is de minimis. The words “This product contains genetically modified organisms” must appear on the label itself or in an accompanying document (Articles 21 and 26).

In a related matter, the United Nations Food and Agriculture Organization (FAO) and the World Health Organization (WHO) have jointly published recommendations to prevent any health risks from consuming GMOs, e.g., in foods. They seek to protect consumers from risks that GMOs could pose for people suffering from food allergies by preventing allergy-provoking foods (such as Brazil nuts) from ending up in bio-engineered products.

Citation: Directive 2001/18/EC ..., 2001 O.J. of European Communities (L 106) 1, 17 April 2001; Commission of European Communities RAPID (February 16, 2001); European Union in US press release No. 03/01 (February 16, 2001); United Nations press release of April 12, 2001.

FOREIGN BAR MEMBERSHIP

English Master of Rolls decides that British citizen who had graduated from California law school but had not passed all parts of California bar examination was ineligible to become English solicitor by taking “Qualified Lawyers Transfer Test”

On June 20 and July 27, 2000, the Law Society in London ruled that J. Driver was not eligible under the Qualified Lawyers Transfer Regulations 1990 (the Regulations) to take the Qualified Lawyers Transfer Test (QLTT) so that he could then apply for admission to the Roll of Solicitors. Driver appealed this decision to the Master of the Rolls pursuant to the Regulations.

If a foreign lawyer seeks admission to the Roll of Solicitors, passing the QLTT is an essential stage to becoming a Solicitor without the more strenuous education and training that other routes demand. When combined with further appropriate training requirements, passing the Test entitles the applicant to join the Roll of Solicitors in England and Wales. The Regulations specify the criteria which are a condition precedent to sitting for the QLTT. If they are met, the Law Society issues a certificate of eligibility to take the Test. This document also lists the subject matters of the QLTT the applicant must take as well as any further training requirements.

According to papers filed by Driver, he is a British citizen who read English as an undergraduate at the University of Sussex, receiving his degree in July 1978. In 1976, Driver emigrated to the United States. He passed the Law School Admissions Test (LSAT) with a score of 680 out of 800. In December 1983, he obtained his J. D. degree from the University of San Diego Law School. Driver’s petition alleges that he passed the Multistate Bar examination in 1994, although he has produced no documentary evidence showing his score or whether it was good enough to qualify him to become a practicing attorney in California or other American states.

In February 1994, Driver passed the main California bar exam as shown by a certificate to that effect. Passing a legal ethics exam, however, is a further requirement for admission to the California Bar. While Driver was still in the U.S., he worked as a law clerk to a California lawyer during law school. Between 1984 and 1991, he served as “Corporate Counsel” for a company calling itself “21st Century Financial” in San Diego. Driver went back to England, however, without having passed the ethics exam. There he secured a diploma in Business Information Technology in a European context from Canterbury University in November 1998.

Driver began trying to become a solicitor in 1996 by corresponding with the Law Society. In June of that year, the Society sent Driver a long letter explaining the applicable Regulations and the QLTT. The letter concluded by informing Driver that they were of no help to him since he had not completed all the Bar examinations required to become a California attorney.

On appeal, the Master of the Rolls dismisses Driver’s petition. Although Driver made various arguments as to how legally knowledgeable he is, he failed to focus on the narrow issue of whether he came within the Regulations. They specifically require as to California that an applicant be an “attorney-at-law” there.

“It is right to observe that it may well be the case that the training and experience that Dr. Driver gained in California result in his being a suitable person to transfer to the solicitors' profession in this country subject, perhaps, to certain further training. But that is not the issue because the Regulations do not give the Law Society a free discretion as to who should be admitted and on what terms. Dr. Driver is not an overseas lawyer within the definition of the Regulations because he has not qualified to practise as a member of the Californian State Bar. ... He has not passed the examination dealing with ethics, an important area for any practicing lawyer.”

“In those circumstances, it is plain that the Law Society has been correct at all stages in informing Dr. Driver that the Qualified Lawyers Transfer Regulations do not enable him at present to apply to take the QLTT. His present qualifications, perhaps, put him in a position to qualify in California and then to invoke the Regulations. They are also qualifications which could well prove advantageous should he choose to become a solicitor by other routes that are available to him.” [N/A]

Citation: In the [Matter] On Appeal from Law Society, 2001 W.L. 272957 CA), [2001] E.W.C.A. Civ. 372 (Royal Cts. of Just.) (Smith Bernal Transcript).

INSURANCE

In aftermath of dismissed “Benzodiazepine Litigation” against U.K. drug company in Great Britain and Ireland, English Court of Appeal upholds company’s claims for payment of litigation costs by insurance carriers where New York law governs some policies and English law governs others

In the so-called “Benzodiazepine Litigation,” up to 11,000 users of drugs such as Ativan and Serenid sued John Wyeth & Brothers Ltd. (Wyeth) in the courts of England, Scotland, Wales and Ireland in the late 1980s. The English courts ultimately struck out all their claims after the withdrawal of legal aid. The actions pending in the other jurisdictions remain dormant and without much prospect of getting to a judgment against Wyeth. The current situation, therefore, is that plaintiffs have not proven any claims against Wyeth nor has it paid any claims.

Nevertheless, Wyeth’s litigation costs in England added up to about BP 17.34 million plus an additional $2.44 million in the United States. According to Wyeth, several of its insurers or their predecessors have a duty to pay both under the policies governed by the law of New York state and under the policies governed by English law. The companies contended that the New York policies did not bind them to pay any, or a proportion, of these litigation expenses.

From May 1972 to October 1977, there was a two-layered insurance structure. The Guardian Royal Exchange (GRE) provided for the first layer and two AFIA companies furnished coverage for the second layer. St. Paul Mercury Insurance Company (St. Paul) coverage was in effect from May 1972 to July 1975 and Aetna Insurance Company (Aetna) coverage applied between July 1975 and October 1977. From November 1977 to 1980, there was also two-layered coverage where an AFIA company, Home Insurance Company (the Home) did the primary layer and Aetna the secondary level.

In Wyeth’s suit against the insurance carriers, it was common ground that English law governed the Home policy in the primary layer while New York law governed the issues arising under the second layer, the excess policies. From January 1984 onwards, the Cigna Group had taken over AFIA. Other defendant companies assumed the interests and liabilities of St. Paul, Aetna and the Home, hereinafter referred to collectively as Cigna.

Under the GRE primary layer policies for the period May 1972 to October 1977, GRE had a right to “buy-out” by annually paying 200,000 of Wyeth’s litigation expenses during their coverage period. GRE did exercise the right by making substantial payments to Wyeth in 1990 and 1991, thus ending its liability. According to Wyeth, AFIA is bound to pay 100% of its coverage until March 1994.

Wyeth filed this insurance litigation in the English Commercial Court in May 1996. This is an appeal from two decisions of that court. By a judgment dated April 18, 2000 (the main judgment), the judge applied New York law to various issues surrounding the construction of policies issued by members of the AFIA group of companies in whose shoes now stand one or another of the defendants. In the second, delivered on November 13, 2000, the lower court again ruled on two issues dealt with in its main judgment, this time involving the application of English law to the interpretation of an AFIA policy.

Wyeth’s position was that, as of March 18, 1994, it became clear that Cigna should cover 31.49% under the New York policies and 29.56% under the Home policies. Wyeth contended that Cigna was liable for 100% of the litigation costs incurred between the date of GRE’s buy out and March 18, 1994. The Commercial Court ruled essentially for Wyeth and the insurers appealed. The Court of Appeal (Civil Division) dismisses the appeals from both judgments.

The Court holds that the “efficacy clause” does not preclude insurance coverage for the claims in the benzodiazepine litigation either under the New York policies or under the Home policy. “It is obvious that, in most cases, it will not be clear whether the litigation is going to succeed or not when a primary insurer may want to consider tendering its limits whether under a buy‑out provision or otherwise. It would be quite illogical for it to be a breach of the maintenance warranty either to enter into a buy‑out arrangement or to exercise it only if it turned out eventually that the claim was defeated on liability.” [para. 37] No merit is found in the insurers’ suggestions that GRE had acted in bad faith or at least had violated the “maintenance clause” in the policy by making substantial payments to Wyeth for its litigation costs.

The Court next turns to the question of liability to reimburse a defendant for costs where the substantive claims against it do not prevail. There are two major types of litigation insurance under New York law. Under one type, the duty to pay litigation expenses arises only when coupled with a duty to indemnify for substantive claims actually adjudged against the insured. There is also a type of policy where the obligation to defend or to pay for a defense arises as of the start of the litigation. “Whether that obligation is to pay costs as they are incurred for litigation relating to claims which might fall within the cover (as per the duty-to-defend obligation), or simply to fund until it is known whether the claims are within the cover, or whether the obligation is simply to indemnify once liability has been established, will depend on the proper construction of the policy.” [para. 33]

The Court then outlines its approach to interpretation. “Ultimately, it is for the English court assisted by the rules of construction under New York law and looking at the matter as best it can as if it were a New York court, to make up its mind what these particular clauses meant. [para. 43]

“... In the circumstances of this case where the policy might be primary or excess, I do not see how, when it is excess, that could alter the meaning of the words in any radical way. What it seems that it might do is to alter the time at which the obligation to defend and thus the commencement of the obligation to pay might arise. ... The guiding principle is that the insured, having purchased both primary and excess coverage, cannot be abandoned by his insurer.” [paras. 46, 47] [emphasis supplied] The Court thus answers the issues relating to the New York policies in the same way as the judge below and dismisses the appeal from the main judgment of April 18, 2000.

As to the Home policy, Wyeth sought declaratory relief not only as to costs incurred that reasonably pertained to claims that its products caused injury or disease but also to claims asserting a worsening of those injuries or disease during uninsured years. With reference to these latter claims, Cigna had argued that the Court should limit its coverage to only a portion of the costs.

The Court, however, disagrees with Cigna. “It seems to [the Court] that, if the starting point is that the costs do reasonably relate to the defence of claims falling within the policy period, the contractual right of Wyeth is to be paid those costs. ... [O]nce that threshold has been reached [the Court does not see] that there is any room for saying that simply because the costs may also relate to an increase in the injury during some period outside the cover, the obligation on Cigna is cut down in some way. ” [para. 56] The Court, therefore, dismisses the appeal from the judgment of November 13, 2000. It also denies leave to appeal further to the House of Lords.

Citation: John Wyeth & Bros., Ltd. v. Cigna Insurance Co. of Europe S.A., 2001 WL 239739 C.A.), [2001] E.W.C.A. Civ. 175 (Ct. App. [Civ. Div.] Feb. 9) (Smith Bernal Transcript).

JURISDICTION (CRIMINAL)

In case of fraud by employee during peacekeeping mission in Bosnia, Second Circuit affirms jurisdiction and venue under federal wire fraud statute even though virtually all fraudulent conduct took place outside U.S. territory

Between 1995 and 1998, the United Nations peacekeeping mission stationed Charles Kim, a U.S. citizen, in Zagreb, Croatia, as the Chief of Travel and Traffic in Bosnia-Herzegovina (UNMIBH). While there, Kim took part in a scheme to defraud the UNMIBH by signing off on inflated travel invoices for peacekeepers submitted by employees of a Croatian travel agency and Air France. Essentially, Kim waived the baggage discounts offered for UN peacekeepers which would have allowed them to carry up to 120 kilograms without charge. This resulted in more than $500,000 in improper baggage charges going to Kim and his co-conspirators. UNMIBH was paying its travel vendors by wire transfer from Chase Manhattan Bank in New York City.

The Wire Fraud statute [18 U.S.C.A. Section 1343 (2000)] bars the use of wire transmissions to further a fraudulent scheme. In 1956, Congress amended the statute to make the statute apply to fraud using foreign, as well as interstate, wires. Congress was responding to the prosecution of an individual who had made a fraudulent telephone call from Mexico to the U.S. but who had successfully argued that Section 1343 did not apply to foreign communications.

Kim challenged his present conviction for wire fraud, arguing that jurisdiction and venue in the Southern District of New York was improper because none of the fraudulent or conspiratorial acts took place in the U.S. The U.S. Court of Appeals for the Second Circuit, however, affirms.

At the outset, the Court notes that “although there is no general bar against the extraterritorial application of our criminal laws to American citizens, the Supreme Court has long recognized a presumption against such applications. [Cit.] The presumption against extraterritorial applications is overcome, however, when it is clear that Congress intends the statute to cover conduct that occurs outside the United States. [Cit.] We must therefore determine whether Congress clearly intended that the statute at issue here apply to foreign conduct. In so doing, we ‘are permitted to consider ‘all available evidence’ about the meaning of the statute, including its text, structure, and legislative history.’” [Slip op. 5-6]

The Court finds that Congress did clearly intend the wire fraud statute to apply to fraud committed abroad. First, there is no logical reason for Congress to protect only “foreign commerce” that occurs within the U.S. Second, the Court notes that, in this case, the fraud involved an American perpetrator and a New York victim, the United Nations.

Also, two Circuit precedents have found jurisdiction over fraud perpetrated abroad under use of the telecommunication systems of the U.S. “Kim nevertheless argues that we should ignore this binding precedent because those cases involved defendants who themselves used wire communications in furtherance of their schemes, while in Kim’s scheme the wires were sent and received by innocent parties. This argument fails to comprehend the parameters of the wire fraud statute. The statutory language of Section 1343 makes one guilty of wire fraud if he ’transmits or causes to be transmitted,’ and we have found that one causes a wire transmission when he acts with knowledge that the use of the wires would follow in the ordinary course of business, or if such use could reasonably have been foreseen.’ ... Thus, it makes no difference that Kim did not himself send the wires.” [Slip op. 10]

Citation: United States v. Kim, 2001 W.L. 356792 (2d Cir. April 10).

JURISDICTION (CRIMINAL)

In matter of first impression, Eleventh Circuit decides that district court properly convicted defendant of money laundering although monetary transactions occurred wholly outside U.S.

Michael Tarkoff was a defense attorney representing Ismael Arnaiz. Arnaiz and his partner Akioshi Yamada had committed fraud by having sham patients visit their medical clinics and then billing Medicare a total of $120 million for services that were not provided or were unnecessary. During the investigation of the medicare fraud, Tarkoff and his partner transferred about $470,000 of Arnaiz’s criminal proceeds from Miami to Curacao and later to Israel. Of that money, $50,000 ended up in Tarkoff’s Israeli bank account. The government alleges only that Tarkoff took part in the illegal transfers from Curacao to Israel.

A federal district court convicted Tarkoff of conspiring to commit money laundering and two counts of money laundering [see relevant Statute at 18 U.S.C. Sections 1956(h) and 1956(a)(1)(B)(I)]. On appeal, Tarkoff argued, among other things, that a conviction based on monetary transactions that took place wholly outside the U.S. is erroneous. Deciding an issue of first impression in the Circuit, the U.S. Court of Appeals for the Eleventh Circuit affirms.

The statute defines “financial transaction” as “(A) a transaction which in any way or degree affects interstate or foreign commerce (I) involving the movement of funds by wire or other means ..., or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree.” 18 U.S.C. Section 1956(c)(4).

The Court agrees with the government that Tarkoff’s conviction complied with the applicable statute. “The government argues that it proved Tarkoff participated in a ‘financial transaction’ as defined in section 1956(c)(4)(A) by virtue of the evidence that Tarkoff and [his partner], two U.S. citizens, traveled from the United States to Israel to transact business, and that the Israeli bank transactions required telephone communications between Israel and Miami, and between Miami and Curacao, to arrange for the funds transfer to Israel. We agree that these facts support a finding that Tarkoff participated in a ‘financial transaction’ as that term is defined in 18 U.S.C. Section 1956(c)(4)(A) because the international travel and communication required to execute the wire transactions affect foreign commerce ‘in any way or degree.’” [Slip op. 12]

Citation: United States v. Tarkoff, 242 F.3d 991 (11th Cir. 2001).

JURISDICTION (CRIMINAL)

German High Court holds that German courts have jurisdiction not only over crimes of genocide committed in Bosnia but also over other serious crimes committed during ethnic persecutions based on fourth Geneva Convention of 1949

In a case of first impression, the German High Court (Bundesgerichtshof, BGH), Third Criminal Chamber, has decided that German courts have jurisdiction not only over crimes of genocide, but also over violent crimes and deprivations of liberty that Serbs committed against Muslim civilians during the ethnic persecutions in Bosnia-Herzegovina in 1992.

The defendant in this case is a Bosnian Serb from Osmaci. He allegedly took part, on May 27-28, 1992, in the Serb-conducted persecutions of Muslims in the Osmaci area with the goal of driving them away or killing them. According to the charges, Serbs searched and looted the houses of Muslims, abducted women and children, and killed, seriously injured, or arrested the men. The persecution was part of the Bosnian Serb policy to take over the areas of Bosnia Herzegovina.

The defendant allegedly took an active role in the persecutions by arresting Muslim men and turning them over to the Bosnian military, and by seriously injuring five of them. He was also one of the guards at a makeshift prison for Muslim men and personally saw to the involuntary transport of 56 Muslim men.

A German court charged defendant with taking part in genocide and with 56 charges of deprivation of liberty, as well as five charges of aggravated assault. The Court convicted the accused and sentenced him to nine years in prison. The State Supreme Court in Dusseldorf upheld the judgment and the defendant sought review in Germany’s High Court which affirms.

In the High Court’s view, the State Supreme Court in Dusseldorf correctly assumed jurisdiction over the crimes committed in Bosnia Herzegovina. The criminal laws that apply in this case concern the individual rights of bodily integrity and liberty and therefore do not fall under the prohibition against genocide in Section 220a of the Criminal Code (Strafgesetzbuch, StGB). German courts, however, have jurisdiction over crimes such as the one the defendant was charged with in this case because they violate the IV Geneva Convention of 12 August 1949 on the Protection of Civilian Persons in Times of War [75 U.N.T.S. 287, 6 U.S.T. 3516, T.I.A.S. 3365]. This treaty, inter alia, bans torture and inhuman treatment of civilians, as well as illegal abductions or arrests. It also requires the parties (which include Germany, the remainder of Yugoslavia, and Bosnia Herzegovina) to prosecute such crimes.

According to the Criminal Code’s incorporation of international law (Weltrechtsprinzip) in Section 6, Number 9 StGB, the obligation to prosecute such crimes applies to crimes committed by foreigners abroad, as long as the situation meets all other treaty requirements. The High Court does not decide the issue of whether such a prosecution requires a “domestic link” (Inlandsbezug) between defendant and Germany. The Court, however, points out that even if that were a requirement for jurisdiction, it would be fulfilled in this case. At the time of his arrest in Germany, the defendant had registered with government authorities as unemployed and was receiving certain government benefits.

Citation: Bundesgerichtshof (BGH) [German High Court], Urteil vom 21. Februar 2001 - 3 StR 372/00; BGH press release No. 11/2001 (February 21, 2001).

TAXATION

Supreme Court of Canada rules that Canadian taxpayers’ attempt to acquire losses of their American partners from sale of Texas apartment project was invalid since Canadian group did not meet all elements of business partnership

A Texas partnership was involved in building an apartment complex in Dallas. The sale of the Dallas Complex incurred potential losses which Philip Douglas Backman and other Canadians tried to acquire so that they could use the losses as an income tax deduction in Canada. During a single day, a series of transactions made them assignees of the interests of the original American partners. The Canadians then “disposed of” the complex to the American partners, causing the realization of accounting losses to the Canadians. Under Section 96 of the Income Tax Act, they used the accounting losses as deductions in computing their 1988 taxable income figure. In looking behind the transactions, however, the Canadian tax authorities disallowed the claim for partnership losses.

The Canadian partners also obtained a one percent interest in a Canadian oil and gas property for $5,000. These partners, however, did not manage this interest, it never produced a profit, and production stopped soon after the acquisition. Canadian authorities also disallowed this aspect of the claim for partnership losses.

Backman filed a notice of objection but the authorities confirmed the reassessment. His appeals to the Tax Court of Canada and then to the Federal Court of Appeal were unsuccessful. Both tribunals reasoned that the definition of a partnership was not met in this case. Upon review, the Supreme Court of Canada dismisses Backman’s appeal.

If a taxpayer wishes to deduct Canadian partnership losses through Section 96 of the Income Tax Act, he or she has to qualify under the definition of partnership under the applicable provincial or territorial law. A partnership has three elements: (1) a business (2) carried on in common (3) with a view to profit. This might involve the continuation of an existing business and the business does not have to go on for a long time. Forming a partnership for a single transaction may be enough. The clearest evidence of a common purpose is the entry into a valid written agreement that lays out the partners’ respective rights and obligations.

The existence of a profit goal (even an ancillary one) involves plumbing the intentions of the parties. While the formation of a partnership mainly to obtain a tax loss is possible, the elements of the original partnership must continue. A mere assignee acquires only those rights and entitlements provided for in the relevant statute or partnership agreement.

In this case, the Court concludes that the basic criteria for a valid partnership were not met. There was no intention to carry on the management of the Dallas apartment complex for profit. Nor was there any evidence that the partners put in more than nominal time, attention and labor on the project and nor did the Canadian “partners” agree to incur any liabilities to other persons arising out of this complex. Buying a working interest in the oil and gas property also failed to show an ancillary intention to make a profit.

Citation: Backman v. Canada, 2001 S.C.C. 10 (Sup. Ct. Can. 2001).

TAXATION

Finding that aircraft engines are products distinct from aircraft as a whole, Second Circuit allows tax benefits to engine manufacturer for exports under DISC program

Congress created the Domestic International Sales Corporation (DISC) program established by the Revenue Act of 1971 [Pub. Law 92-178, 85 Stat. 497] to increase exports by providing tax incentives for selling products abroad. [The main benefit is a tax deferral on otherwise immediately taxable net income.] A corporation that qualifies as a DISC does not pay federal income tax. Instead, a portion of the DISC’s taxable income earned from sales of “export property” is deemed distributed to (and taxable to) the DISC shareholders in the taxable year in which the income was earned by the DISC. The remainder of the taxable income earned by the DISC from exports is generally not taxable until distributed by the DISC, the DISC stock is sold, or the corporation ceases to qualify as a DISC.

The Tax Reform Act of 1984 greatly narrowed the DISC program and largely replaced it by the so-called “Foreign Sales Corporation.” [The latter notion is the subject of controversy between the U.S. and the European Union before the World Trade Organization (WTO). The WTO considered the tax benefits improper export subsidies, and the U.S. and the EU are cooperating in finding a mutually acceptable solution. See 2000 International Law Update 162.]

General Electric Company (GE) manufactures, among other things, aircraft engines and thrust reversers. In this case, GE claimed DISC tax benefits for the years 1979 and 1980 for aircraft engines and thrust reversers that GE sold to Boeing Aircraft, Inc. and to McDonnell Douglas Corporation (MDC). These manufacturers attached these products to their airframes for export. GE claimed DISC tax benefits based on the exportation of the engines.

The Tax Court ruled that the engines did not constitute “export property” under the Act. They were not distinct export products, but merely a part of the aircraft itself. Thus, GE was not entitled to certain tax benefits under the DISC program. GE appealed from the U.S. Tax Court’s decision. The U.S. Court of Appeals for the Second Circuit reverses in part, vacates in part, and remands.

The Court first rejects the Commissioner’s argument that, because the engines were “incorporated” into the airframes, the Act’s legislative history showed that Congress did not intend that the IRS treat such items as “export property.” The Act is ambiguous and under Treasury Regulation 1.993-3(d)(2)(iii) (1977) the engines were not “subjected to assembly or other processing” by being attached to the airframes. In the Court’s view, the engines are “complete products” when sold to the aircraft manufacturers. Furthermore, the Federal Aviation Administration tracks such engines separately from airframes. In addition, aircraft builders routinely remove engines from one airframe and install them in another. Therefore, the Court reverses the Tax Court’s judgment as to the engines and remands for entry of judgment in favor of GE.

As to the thrust reversers, however, the result is different. The Court points out that (1) the Tax Court did not analytically differentiate between engines and reversers and (2) that there are potentially material differences in this context between them. Therefore, the Court vacates the Tax Court’s judgment as to the thrust reversers and remands for further consideration.

Citation: General Electric Co. v. Commissioner of Internal Revenue, 2001 W.L. 314573 (2d Cir. April 2, 2001).

N.O.A.A. issues guidelines for research and exploration of R.M.S. Titanic. The U.S. Department of Commerce, National Oceanic and Atmospheric Administration (N.O.A.A.) has issued final guidelines for the future research on, and exploration of, the R..M.S. Titanic. Pursuant to the R.M.S. Titanic Maritime Memorial Act of 1986 [Pub.Law 99-513, 100 Stat. 2082], U.S. authorities developed the guidelines in consultation with Canada, France, the UK, and other interested countries. Pending the adoption of an international agreement on the Titanic, the guidelines ban any research or exploration that would physically alter, disturb or salvage the vessel. The preferred preservation policy for the Titanic and its artifacts is to be in-situ preservation. Thus, only educational, scientific or cultural interests may justify recovery or excavation of the wreck. Citation: 66 Federal Register 18905 (April 12, 2001).

U.S. and EU resolve dispute over EU banana regime. On April 11, 2001, the U.S. and the European Union (EU) announced their agreement to resolve their long-standing dispute over the EU banana regime. See 2000 International Law Update 191. The EU will implement a “tariff-only” system by 2006. During the transition period, companies will be able to import bananas into the EU through import licenses based on past trading activities, beginning on July 1, 2001. At the same time, the U.S. will lift the sanctions that it imposed on the EU with WTO authorization in April 1999. – The U.S. had challenged the EU banana regime that favors banana imports from former colonies and dependent territories and excludes Central American and Latin American bananas traded by U.S. companies. In 1997, the World Trade Organization (WTO) found in favor of the U.S. (WTO Dispute WT/DS27). Citation: U.S. Trade Representative press release 01-23 (April 11, 2001) and related fact sheet; European Union in US -- new release No 27/01 (April 11, 2001).

Australian government bars Shell takeover attempt. On April 23, 2001, Peter Costello, the Australian Treasurer (equivalent to a finance minister) turned down a plan by the Royal Dutch-Shell Group to purchase Woodside Petroleum, Ltd. Already the owner of 34% of Woodside shares, Shell, a century-old presence in Australia, had proposed to increased its holdings to 56%. Invoking a rarely-exercised power, Mr. Costello explained that foreign ownership of Woodside, Australia’s largest energy company, would be detrimental to the national interest. Concern that Australian policy had become more inhospitable to foreign investment drove Woodside shares down 10% while the Australian dollar also lost almost 3% as against the U.S. dollar. Mr. Costello noted that Woodside plays a leading role in the nation’s most substantial developed energy resource, the North West Shelf gas field. Citation: New York Times, April 24, 2001, Section W, page 1 (byline of Becky Gaylord).

U.S. designates Ukraine as priority foreign country under “Special 301." Because of large-scale compact disc (CD) piracy in the Ukraine that results in exports of 30 to 40 million CDS and losses to U.S. recording companies of approximately $200 million, the U.S. Trade Representative has designated the Ukraine a “Priority Foreign Country” under the Special 301 program (see Section 182(c)(1)(B) of the Trade Act of 1974). Even though the Ukrainian President had endorsed the U.S.-Ukraine Joint Action Plan to Combat Optical Media Piracy at a summit held in June 2000, it appears that the Ukraine has failed to make much progress. The Trade Representative has also initiated a Section 302 investigation of the Ukraine’s laws and practices in the area of intellectual property rights. That program reviews the adequacy of intellectual property protection in certain countries and encourages improvements. Failure by the Ukraine to address U.S. concerns within three months could lead to U.S. trade sanctions such as suspension of duty-free treatment under the Generalized System of Preferences (GSP). Citation: 66 Federal Register 18346 (April 6, 2001); U.S. Trade Representative press release 01-15 (March 13, 2001).

U.S. and Greece resolve dispute over television piracy. On March 22, 2001, the U.S. Trade Representative, Robert B. Zoellick, announced that the U.S. and Greece have formally resolved their dispute before the World Trade Organization (WTO) over television piracy in Greece. On April 30, 1998, both the EU and the U.S. had brought complaints before the WTO about copyright infringements and television piracy in Greece (WTO Disputes WT/DS124/1 and WT/DS125/1, respectively). The U.S. had claimed, in particular, that Greece had failed to enforce its intellectual property laws against television stations that broadcast U.S. copyrighted works without authorization. Under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), members must provide effective enforcement procedures where infringement of intellectual property rights takes place. Since the U.S. filed its complaint in 1998, Greece has stepped up enforcement and passed new legislation allowing the immediate closure of television stations that infringe on intellectual property rights. Citation: U.S. Trade Representative press release 01-17 (March 22, 2001).

U.S. State Department certifies Yugoslavia. On April 2, 2001, the U.S. Secretary of State certified the Federal Republic of Yugoslavia as meeting the criteria of Section 594 of the Foreign Operations, Export Financing and Related Programs Appropriations Act of 2001. The Secretary also stated that the Administration will encourage Yugoslavia to cooperate with the International Criminal Tribunal for Yugoslavia in the Hague. Citation: U.S. Department of State press statement (April 2, 2001).

U.S. Trade Representative releases 2001 Inventory of Trade Barriers. On March 30, 2001, the U.S. Trade Representative released “The 2001 National Trade Estimate Report on Foreign Trade Barriers.” The Omnibus Trade and Competitiveness Act of 1988 mandates this annual report which lists foreign trade barriers to U.S. exports. Examples of itemized trade barriers include the Canadian forest management system, Chinese import standards and phytosanitary requirements that exclude U.S. products, and the EU’s lack of transparency in developing regulations. Citation: U.S. Trade Representative press release 01-17 (March 30, 2001). [Report is available on Internet on U.S.T.R. website “www.ustr.gov”, and bound copies are available from U.S.T.R. Public Affairs Office.]

Moscow court rules for family in Pasternak estate litigation. The decade‑long legal struggle over the exclusive rights to Nobel Prize‑winner Boris L. Pasternak's manuscripts and notes came to a head on April 20 last. A Moscow court ruled in favor of his daughter‑in‑law Natalia Pasternak by dismissing the appeal of Olga Ivinskaya, the woman who was the model for “Lara,” his most famous heroine, in the novel “Doctor Zhivago.” The Italian publication of the novel in 1957 made the poet‑novelist renowned in the outside world but an outcast within the U.S.S.R. Though Pasternak had declined to accept his 1958 Nobel Prize for Literature, the Soviet government had him thrown out of the Writers’ Union and had banned his works. In 1987, however, it “rehabilitated” him. Ivinskaya, Pasternak's inspiration and mistress for 14 years, had kept the author’s archives until he passed away in 1960. At that point, the KGB, the former U.S.S.R.’s intelligence service, had confiscated the materials. Ivinskaya had sued Natalia Pasternak, who was married to the writer's son Yevgeny, after the disintegration of the Soviet Union in 1991. A court of first instance had held for Natalia in August 2000 in a continuation of the suit by the family of Ivinskaya who had died in 1995. Citation: Agence France-Press (Online), Moscow, April 20; 2001 W.L. 2388837.

U.S. streamlines processing of patent applications under Patent Cooperation Treaty. The U.S. Department of Commerce, U.S. Patent and Trademark Office (USPTO), has amended its rules of practice regarding applications filed under the Patent Cooperation Treaty of 1970 (PCT) [28 U.S.T. 7645, T.I.A.S. 8733, 37 C.F.R. Part 1]. It streamlines procedures for filing and prosecuting international applications under the PCT and carries out amendments to the PCT Regulations that the PCT Assembly had approved during last year’s meeting of the Governing Bodies of the World Intellectual Property Organization (WIPO). The amendments, for example, allow applicants for the U.S. to file a declaration of inventorship as part of the PCT request (PCT Rule 4.17(iv)), and to correct or add to the Request any declaration referred to in the new PCT Rule 4.17 by a notice submitted to the International Bureau. The effective date of the USPTO amendments was March 1, 2001. Citation: 66 Federal Register 16004 (March 22, 2001).

Highest French Court upholds Gadhafi’s head-of-state immunity. Flight 772, a DC‑10 belonging to French airline UTA, was flying from the Congolese capital of Brazzaville to Paris when it blew up over the desert in the west African state of Niger on September 19, 1989, killing 170 people. In March 1999, after a ten-year investigation, a French court convicted six Libyans in absentia (including Gadhafi's brother‑in‑law) for planting a bomb on the plane, sentencing all of them to life in prison. The families of the victims next brought an action against Moammar Gadhafi himself for “complicity in murder” in which the defendant claimed immunity as head of state. An intermediate appellate court had rejected the immunity defense and the case went to the Cour de Cassation, France’s highest court on the private law side. On March 13 last, that Court ruled at the request of the state prosecutor that Gadhafi, as head of the Libyan state, was immune from investigation leading to a criminal prosecution in France because of “international custom.” Citation: Newsday, 2001 W.L. 9221479, March 14; Agence France Presse (Online), March 13, 2001.

U.S. adds Brazil, Latvia, and Ukraine to Nuclear Suppliers Group. The U.S. Department of Commerce, Bureau of Export Administration (BXA), has added Brazil, Latvia and the Ukraine to the Nuclear Suppliers Group (NSG), whose member countries have agreed on export licensing procedures for the transfer of nuclear-related items [see 15 C.F.R. Parts 738, 740, 744, and 772]. In addition, the BXA has added Austria, Finland, Ireland and Sweden to the list of countries that are not subject to certain nuclear end-use restrictions. Citation: 66 Federal Register 18401 (April 9, 2001).