Legal Analyses written by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
2000
International Law Update, Volume 6, Number 3 (March).
ECONOMIC
SANCTIONS
EU
issues "Common Position" on Taliban regime in Afghanistan expressing
EU's intent to resist terrorism, to curtail drug and munitions trafficking as
well as to foster peace and political stability; it also enacts Regulation that
freezes Taliban assets and bans its planes from EU airspace
Concerns
over terrorism, drugs, and political instability having to do with Afghanistan,
have led the European Union (EU) to issue a "Common Position"
(2000/55/CFSP) which sets forth its intent to play an effective role in
restoring peace and stability to that nation. The EU commits itself, among
other things, to support the U.N. Special Mission to Afghanistan (UNSMA), to
maintain the arms and munitions embargo it imposed in 1996, and to urge
countries involved in the Afghanistan conflict to withdraw their personnel and
to cut off their military support (Article 2).
In
addition, the EU pledges to continue its humanitarian support of Afghanistan's
people. Moreover, it will carry on the fight against drugs, such as by furthering
sustainable alternative development to replace cultivation of drug sources with
other crops (Articles 4 & 5). Finally, the Common Position condemns
terrorism and urges the Taliban faction to close down the sites of foreign
terrorists inside Afghanistan and to comply with U.N. Security Council
Resolution 1267/99.
In a
related matter, the EU has issued a Regulation spelling out its sanctions
against the Taliban. It freezes all Taliban financial assets, and bars the
entry into the EU's airspace of all aircraft listed in the Regulation (e.g.,
Afghan military and civil aircraft). The Regulation also specifies the
competent government authorities in each EU Member State charged with enforcing
the sanctions. For example, in Belgium, the Finance Ministry administers the
freezing of Taliban funds; in the UK, the Department of Environment, Transport
and the Regions oversees the flight bans. [Editorial Note: Afghanistan's ruling
Taliban movement will not give in to the U.S.-led international pressure to
expel terrorism suspect Osama bin Laden. The Washington Post reported that
Taliban Foreign Minister Wakil Ahmad Muttawakil confirmed this during his
recent visit to Pakistan. The U.S. suspects that Bin Laden had planned the
fatal bombings of two U.S. embassies in East Africa and other terrorist acts.
See Washington Post, January 25, 2000, page A13.]
Citation:
2000 O.J. of European Communities (L 21) 1, 26 January 2000 (common position).
[The EU had issued Common Position imposing sanctions on Taliban in November
1999, see 1999 O.J. of European Communities (L 294) 1, 16 November 1999.]; 2000
O.J. of the European Communities (L 43) 1, 16 February 2000 (specifying
sanctions).
EXTRADITION
Hong
Kong Court dismisses appeal of proposed extraditee to United States from lower
court's refusal to issue letters of request so that extraditee could
cross-examine chief accuser in U.S. to bring out latter's alleged lack of
credibility
The
United States asked Hong Kong to extradite Chong Bing Keung Peter (appellant) for
trial on several serious offenses. The alleged offenses were conspiracy to
murder, conspiracy to commit offenses against the law relating to dangerous
drugs, arson, and criminal intimidation. In February 1999, Hong Kong
authorities arrested appellant, and a court of committal (COC) ordered him held
pending the Chief Executive's determination on whether to hand appellant over
to U.S. custody.
Appellant
then sought a writ of habeas corpus in the Court of First Instance (CFI) which
declined to issue the writ. Appellant then went to the Court of Appeal and
raised three main points.
First
he contended that the COC should have allowed him to apply to the CFI for the
issuance of a letter of request to an American court to take the testimony of
witnesses. His goal here was to show that a main prosecution witness, Wayne
Kwong Kwong, so lacked credibility that no court could rationally extradite
based upon his falsehoods. In his lengthy affidavit, Kwong averred that he had
been appellant's accomplice and that he had pleaded guilty in the U.S. to a
number of offenses. As a result of the information he had given, and of his
agreement to testify against the appellant, he had received a substantially
reduced sentence.
Secondly,
appellant claimed that the evidence against him would not be enough to warrant
a trial in Hong Kong. Finally, in appellant's opinion, the COC had erred in
spurning his contention that his Chinese ethnicity would prejudice him at an
American trial. The Hong Kong Court of Appeal, however, dismisses.
In
the first place, the Court points out, a COC in extradition does not normally
evaluate the credibility of the witnesses relied upon by the requesting State.
Even in assessing the adequacy of the evidence by Hong Kong standards, the
issue is "whether the facts which the evidence tended to prove would
amount to the offences for which the fugitive's extradition was sought."
[Slip op. 3] The COC must determine whether the testimony is capable of belief,
not whether the COC itself believes it.
That
being so, there is no point in having the CFI issue a letter of request to
allow cross-examination in the U.S. to challenge Kwong's credibility.
"Further, the evidence of that witness was not subject to such internal
inconsistencies or contradictions that it could not safely be relied upon, in
which case the court would be justified in rejecting the evidence
altogether." [Slip op. 3-4] On the contrary, the main witness' affidavit
met the test for committal under Hong Kong law.
Nor
did the COC mistakenly reject appellant's arguments on ethnic bias against
Chinese allegedly involved in organized crime. "The court of committal was
also entitled to conclude, on all the evidence before the magistrate, that the
fact that the appellant was Chinese was not going to prevent him from getting a
fair trial in the United States. There was simply no substance in the
complaint, even at the initial stage, that the court of committal erred in law
in not finding otherwise." [Slip op. 4]
Citation:
Chong Bing Keung Peter v. United States, 2000-11 H.K.C. 256 (Ct. App. Hong
Kong).
HUMAN
RIGHTS
Citing
international human rights conventions, Supreme Court of Israel bars use of
several interrogational pressure techniques sometimes used by General Security
Service when questioning terrorist suspects such as vigorous shaking and
"Shabach" position
Since
the inception of the State of Israel, terrorist organizations have had its
annihilation as their goal. Such violent groups do not distinguish between
civilian and military targets nor do they differentiate between men, women and
children as they mount their random attacks often in crowded public areas of
Israeli cities. Between January 1996 and May 1998, for example, terrorist
attacks such as suicide bombings and car bombs had killed 121 persons and
injured 707. The main Israeli body assigned to combat terrorism on a daily
basis is the General Security Service (GSS). It has a creditable record of
preventing many terrorist attacks.
To
carry out this preventive function, the GSS interrogates those suspected of
having engaged in, or of planning, terrorist violence. In the course of doing
so, the GSS sometimes applies "non-violent psychological pressure"
and "a moderate degree of non-violent psychological pressure." Two
public organizations, the Public Committee Against Torture in Israel (PCATI)
and the Association for Citizen's Rights in Israel (ACRI) went to court to
challenge the right of the GSS to use these types of pressure during
interrogations. They brought their action against the State of Israel, the GSS,
the Prime Minister and several other state officials and agencies.
In
addition, five persons who claim they have suffered these pressures joined as
plaintiffs. Several of these persons have already been convicted of terrorist
activities and are serving long sentences. The GSS argued that the information
obtained as a result of using these techniques had saved many lives by aiding
in the prevention of major bombings and other attacks. The matter came before
the nine Justices of the Supreme Court of Israel sitting as the High Court of
Justice on a motion for an order nisi that would ban future use of the
specified pressure tactics. The Court grants the motion.
One
of the practices being challenged is the forceful shaking of the suspect's
upper torso, back and forth, repeatedly, so as to cause the neck and head to
dangle and vacillate rapidly. There is conflicting expert opinion evidence in
the record as to whether this method does, or may, cause brain damage or harm
to the spinal cord. Although one death may be partially attributable to
shaking, the GSS argued that it is careful to obey relevant directives and to
have medical advice at hand. In any event, shaking is a last resort. Without
its availability in special cases, the GSS contended, it could not uncover many
terrorist conspiracies in time to forestall them.
According
to plaintiffs, another technique involves the "Shabach" position. It
basically involves tying a suspect's hands behind his back, and seating him on
a low chair tilted forward. Interrogators then cover the suspect's head with an
opaque sack and play very loud music in the room for long periods of time.
Plaintiffs alleged that this procedure causes serious muscular pain and headaches.
Another practice objected to was the "Frog Crouch." It consists in
making the suspect engage in consecutive, periodical crouches on the tips of
his toes for five minute intervals. The GSS discontinued it, however, prior to
the Court's hearing on the applications. Various plaintiffs also complained
that excessive tightening of hand or leg cuffs often seriously injured a
suspect's hands, arms and feet.
Some
plaintiffs additionally complained that the use of the above methods often
brought about protracted sleep deprivation to the point of exhaustion. Though
denying any deliberate attempt to "break" a suspect from exhaustion,
the State conceded that the necessary length of some questioning in major or
complex cases may incidentally deprive some suspects of their regular sleep
hours.
Plaintiffs
argued first that the GSS lacked any statutory authority to interrogate
individuals. Secondly, they maintained that the specified practices all
constituted torture which international law expressly prohibits. Defendants
disputed both points. In particular, they analogized the situation faced by GSS
counter-terrorist efforts to the statutory doctrine of "necessity"
interposed as a defense to a criminal charge. On the second issue, defendants
denied that these practices constituted "torture" or
"inhuman" or "degrading" treatment as defined in major
human rights conventions. The Court agrees essentially with plaintiffs and
issues the order nisi.
The
Court first points out the momentousness of the state's exercise of the power
to interrogate regardless of the means.
"An
interrogation inevitably infringes upon the suspect's freedom, even if physical
means are not used. Indeed, undergoing an interrogation infringes on both the
suspect's dignity and his individual privacy. In a state adhering to the Rule
of Law, interrogations are therefore not permitted in absence of clear
statutory authorization, be it through primary legislation or secondary legislation,
the latter being explicitly rooted in the former." [Para. 18]
The
Court is unable to find a statute that explicitly authorizes the GSS to
investigate and interrogate. On the other hand, Article 2(1) of the Criminal
Procedure Statute does empower specifically designated police officers above
the rank of inspector to orally examine and take statements from any person
supposed to be acquainted with the facts of an offense into which that officer
is inquiring. Since the Minister of Justice had acted under this provision in
designating certain GSS officials to interrogate suspected terrorists, the GSS
has this general authority.
Next,
the Court considers whether the use of the above physical and mental pressures
form part of the "law of interrogation." In the Court's view, they do
not. "A democratic, freedom-loving society does not accept that
investigators use any means for the purpose of uncovering the truth. 'The
interrogation practices of the police in a given regime,' noted Justice Landau,
'are indicative of a regime's very character' (Cit.) At times, the price of
truth is so high that a democratic society is not prepared to pay it."
[Para. 22]
The
Court declares that a reasonable interrogation is one free of torture, as well
as inhuman or degrading treatment in accord with international human rights
agreements to which Israel is a party. [Editorial Note: Israel is a party to
the International Covenant on Civil and Political Rights of 1966, 999 U.N.T.S.
171 and the Convention against Torture and other Cruel, Inhuman, or Degrading
Treatment or Punishment, 24 I.L.M. 535 (1985)]. On the other hand, every
thorough interrogation invades privacy and discomfits the subject. Long periods
of close questioning can also cut into the subject's regular sleeping patterns.
The
Court then applies these general principles to the practices in question.
"Plainly put, shaking is a prohibited investigation method. It harms the
suspect's body. It violates his dignity. It is a violent method which does not
form part of a legal investigation. It surpasses that which is necessary. Even
the State did not argue that shaking is an 'ordinary' investigation method
which every investigator (in the GSS or police) is permitted to employ. ... In
any event, there is no doubt that shaking is not to be resorted to in cases
outside the bounds of 'necessity' or as part of an 'ordinary'
investigation." [Para. 24]
The
so-called "Frog Crouch" fares little better. "This is a
prohibited investigation method. It does not serve any purpose inherent to an
investigation. It is degrading and infringes upon an individual's human
dignity." [Para. 25]
Petitioners
also complained of overly tight hand and leg cuffs. The Court agrees that
cuffing intended to cause pain goes beyond the needs of security. This is
particularly true with the "Shabach" position. "[T]he cuffing
associated with the 'Shabach' position is unlike routine cuffing. The suspect
is cuffed with his hands tied behind his back. One hand is placed inside the gap
between the chair's seat and back support, while the other is tied behind him,
against the chair's back support. This is a distorted and unnatural position.
The investigators' safety does not require it. Therefore, there is no relevant
justification for handcuffing the suspect's hands with particularly small
handcuffs, if this is in fact the practice. The use of these methods is
prohibited." [Para. 26]
Other
aspects of the "Shabach" position also add to its unacceptableness.
"Clearly, the general power to conduct interrogations does not authorize
seating a suspect on a forward tilting chair, in a manner that applies pressure
and causes pain to his back, all the more so when his hands are tied behind the
chair, in the manner described. All these methods do not fall within the sphere
of a 'fair' interrogation. They are not reasonable. They impinge upon the
suspect's dignity, his bodily integrity and his basic rights in an excessive
manner (or beyond what is necessary). They are not to be deemed as included
within the general power to conduct interrogations." [Para. 27]
The
use of the hood also comes in for the Court's denunciation. "For it
appears that at present, the suspect's head covering -- which covers his entire
head, rather than eyes alone,-- for a prolonged period of time, with no
essential link to the goal of preventing contact between the suspects under
investigation, is not part of a fair interrogation. It harms the suspect and
his (human) image. It degrades him. It causes him to lose sight of time and
place. It suffocates him. The covering of the head in the circumstances
described, as distinguished from the covering of the eyes, is outside the scope
of authority and is prohibited." [Para. 28] The Court similarly
disapproves of the loud music as unnecessary for its professed purpose of
preventing suspects from communicating with one another.
Finally,
the Court rejects the State's argument that the statutory recognition of a
"necessity" defense to criminal liability after the fact implies a
general administrative authority to establish a priori directives allowing the
GSS to use physical coercion on suspects . "The reasoning underlying our
position is anchored in the nature of the 'necessity' defense. This defense
deals with deciding those cases involving an individual reacting to a given set
of facts; it is an ad hoc endeavor, in reaction to a event. It is the result of
an improvisation given the unpredictable character of the events. (Cit.) Thus,
the very nature of the defense does not allow it to serve as the source of a
general administrative power." [Para. 36]
The
Court concludes with a somber reference to the "harsh reality" of
Israel's present security situation. "We are aware that this decision does
not ease dealing with that reality. This is the destiny of democracy, as not
all means are acceptable to it, and not all practices employed by its enemies
are open before it. Although a democracy must often fight with one hand tied
behind its back, it nonetheless has the upper hand. Preserving the Rule of Law
and recognition of an individual's liberty constitutes an important component
in its understanding of security. At the end of the day, they strengthen its
spirit and its strength and allow it to overcome its difficulties." [Para.
39]
Citation:
Public Committee Against Torture in Israel v. State of Israel, H.C. 5100/94
et al. (Sup. Ct. Israel, September. 9, 1999).
JUDICIAL
ASSISTANCE
Federal
district court rules that deponents are entitled to copies of their depositions
given in U.S. pursuant to U.S.-Italy mutual assistance treaty in criminal
matters and that confidentiality provision of treaty does not bar this right
Italy
requested U.S. legal assistance on May 7, 1999 based on the Treaty Between the
United States of America and the Italian Republic on Mutual Assistance in
Criminal Matters (Nov. 9, 1982) [98 U.S.T. 25] and 28 U.S.C. Section 1782
(assistance to foreign and international tribunals and to litigants before such
tribunals). The purpose was to gather evidence for a criminal tax fraud
prosecution being carried on in Italy.
As
part of the Italian request, U.S. government officials deposed Herbert Breslin
and Elliot Hoffman ("petitioners") on July 12, 1999, but denied them
copies of their deposition testimony. Therefore, they sought an order to compel
their production pursuant to 28 U.S.C. Section 1782, Rule 30(f)(2) of the
Federal Rules of Civil Procedure (copies of depositions to be made available to
any party or deponent), and the court's inherent authority.
Although
Italy's request did not mention confidentiality, the U.S. State Department had
notified the judge conducting the proceedings that Italy had to have all
information kept under wraps pursuant to Article 8(2) of the Treaty. The U.S.
District Court for the Southern District of New York holds that petitioners are
in fact entitled to copies of their deposition testimony.
"Confidentiality
under this provision extends only to the contents of the request and its
supporting documents and also to the fact that such assistance will be granted.
... Here, ... the Italian authorities ... did request such confidentiality ...
and accordingly, the letter requesting assistance, the documents sent to
support that request, and the fact the United States agreed to assist ... Italy
were within the confidentiality of this provision. But that's the limit of the
confidentiality; the provision was obviously designed to keep the target of the
request unaware of the upcoming demand for testimony ... I can envision an
international organized crime investigation where this might be sod by the
testimony. But that is not the case here." [Slip op. 4-5]
Neither
the confidentiality provision of the Treaty nor the State Department
declaration barred disclosure to petitioners of their own depositions. Under
the plain meaning of Article 8(2), the Treaty does not consider the deposition
itself as confidential. In addition, Section 1782 ordinarily requires the
taking of testimony according to the Federal Rules of Civil Procedure, and Rule
30(f)(2) entitles deponents to copies of their depositions upon payment of
reasonable charges.
Citation:
In re: Request from Italy Pursuant to the Treaty Between the United States of
America and the Italian Republic on Mutual Assistance in Criminal Matters, Misc.
No. M12-329 (RO) (S.D.N.Y. February 16, 2000).
SOVEREIGN
IMMUNITY
Applying
Foreign Sovereign Immunities Act, District of Columbia Circuit holds that U.S.
courts lacked subject matter jurisdiction to adjudicate liability of Venezuela
for actions of its bankrupt shipping corporation on grounds that company was
not "agent" of Venezuela under Act but independent entity whose
routine business activities Venezuela did not control
In
1917, the Venezuelan Government created an international shipping company, the
"Compania Anonima Venezolana de Navegacion" (CAVN). The company remained
under government control until its bankruptcy in 1994. During the bankruptcy
proceedings, another Venezuelan government entity got involved. This was the
"Fondo de Inversiones de Venezuela" (FIV), which assists in the
restructuring and privatizing of state enterprises. On several occasions, FIV
granted financial aid to CAVN but it ultimately failed to save the latter
company.
Twelve
companies which had leased shipping equipment to CAVN between 1982 and 1993
brought the present action. Three of the counts alleged that Venezuela and FIV
(the Government) are derivatively liable for CAVN's breaches of contract. The
fourth count claimed that the Government was directly liable for having caused
CAVN's breaches of contract. Defendants later moved to dismiss the first three
counts based on sovereign immunity but the court denied the motion. In their
interlocutory appeal, the Government argued that they are immune from suit under
the Foreign Sovereign Immunities Act of 1976 (FSIA) [28 U.S.C. Section 1602]
and the "Act of State" Doctrine.
The
U.S. Court of Appeals for the D.C. Circuit finds Venezuela and FIV immune upon
the first three counts. The Court remands on Count 4 so that the district court
can determine for the first time whether Venezuela was immune under the FSIA
and whether Venezuela had a defense under the Act of State Doctrine.
The
FSIA generally recognizes the immunity of foreign states and their
instrumentalities from suit in federal courts. Here, the plaintiffs argued that
the "commercial activity" exception of Section 1605(a)(2) applied.
Implicitly conceding this, the Government countered that CAVN was not its agent
but a legally distinct entity.
Generally,
federal courts do not treat a government entity set up as a juridical being
distinct and independent from the foreign government as an
"instrumentality" of that government. The D.C. Circuit, for example,
has held that a foreign sovereign is immune from suit based upon the acts of
such an instrumentality. See Foremost-McKesson, Inc. v. Islamic Republic of
Iran, 905 F.2d 438, 446-447 (D.C. Cir. 1990). A finding of immunity in such a
situation depends on the degree of "control" and on the doctrine of
"apparent authority."
Here,
the plaintiffs failed to show that the Government had such a close and dominant
relationship with CAVN that it "controlled" the company within the
meaning of the FSIA. That the Government owned .04% of CAVN's stock (FIV owned
the rest) and could appoint CAVN's Board of Directors and other officers is
relevant but does not by itself establish governmental "control." The
Government could influence the company just as a regular shareholder could
without making the company its alter ego or "agent."
"Beyond
the features inherent in a state‑owned corporation, namely the government's
ownership of stock and control of the Board of Directors, this case bears no resemblance
to McKesson. Venezuela did not evince an intent to have CAVN act as its agent
in dealing with the plaintiffs. No one at CAVN sought the Government's approval
for routine business decisions. In short, McKesson is to this case what the
Chicago Manual of Style was to e.e. cummings: not controlling." [Slip op.
10]
As
for "apparent authority," it may be true that the
government-appointed President and Chairman of CAVN, Vice Admiral Efraim Diaz
Tarazon, wearing his naval regalia, had assured one of the plaintiffs that
"Venezuela would support CAVN." This is not enough, however, to make
Venezuela liable for CAVN's corporate acts.
"Tarazon's
decision to dress as an Admiral when he met with one of the lessors is just
that ‑‑ Tarazon's sartorial decision ‑‑ not an indication coming from the
Government that it had authorized him to commit government funds outside the
normal channels running through the Cabinet and the FIV. In the absence of any
evidence of such an authorization from the Government, we reject the
plaintiffs' argument that CAVN had apparent authority to bind Venezuela."
[Id.]
Citation:
Transamerica Leasing, Inc. v. La Republica de Venezuela and Fondo de
Inversiones de Venezuela, No. 98-7206 (D.C. Cir. January 21, 2000).
TAXATION
European
Court of Justice rules that, in declining to grant same tax concessions to
French company's permanent establishment in Germany that it grants to its
purely domestic corporations, Germany violated provisions of EC Treaty on right
of establishment
Saint-Gobain
ZN is the German branch of Compagnie de Saint-Gobain SA, the latter being a
company incorporated under French law with its seat and business management
located in France. Under German tax law, Saint-Gobain ZN is listed on the
German commercial register and functions as a permanent establishment of
Saint-Gobain SA. Since neither its seat nor its business management are located
in Germany, Saint-Gobain SA is subject to limited tax liability there.
This
limited liability applies both to the domestic income its permanent
establishment earns in Germany and to its assets held there including operating
capital.
During
1988, the Finanzamt (Finance Agency) refused to accord Saint-Gobain SA certain
tax concessions pertaining to dividends from shares in foreign corporations and
restricted these concessions to companies subject in Germany to unlimited tax
liability. Among its foreign share holdings, it held 10.2% of the Certain Teed
Corporation in the United States.
Dissatisfied
with the Agency's ruling, Saint-Gobain ZN (plaintiff) challenged it before the
Finanzgericht (Finance Court) in Cologne. Plaintiff complained of the Agency's
refusal to grant it three tax concessions that would have enabled it to avoid
having to pay German taxes on dividend income already taxed in the United
States and elsewhere.
First,
the Agency had decided that the (then applicable) 1954 Treaty for the Avoidance
of Double Taxation between Germany and the United States [as amended by the
Protocol of September 1965] limited its exemption from German corporate taxes
to German entities subject to unlimited tax liability. The Agency also refused
plaintiff a credit for the corporation tax levied on the profits distributed by
the foreign subsidiaries and sub-subsidiaries of Saint-Gobain SA in the
countries in which they are established because German law also restricts this
concession to companies subject in Germany to unlimited tax liability. Finally,
the Agency failed to allow Saint-Gobain SA the capital tax concession for
"international groups" provided for by the German Law on the Evaluation
of Assets on the theory that this provision applied only to domestic companies
limited by shares.
Invoking
EC law, plaintiff argued that the Agency rulings violated the combined
provisions of former Articles 52 and 58 of the Treaty of Rome when they
excluded a French company's permanent establishment in Germany from the
benefits of the above tax concessions. Both Articles deal with the Right of
Establishment.
Perceiving
crucial issues of EC law, the Finanzgericht sought a preliminary ruling from
the European Court of Justice. The European Court of Justice first points out
that well-settled case law regards Article 52 as a fundamental Treaty provision
(along with Article 58) directly applicable within the legal systems of the
Member States since the end of the transitional period.
The
Court rules for plaintiff on the legal issues. "... [T]he refusal to grant
the tax concessions in question to the permanent establishments in Germany of
non‑resident companies makes it less attractive for those companies to have
intercorporate holdings through German branches, since under German law and
double‑taxation treaties the tax concessions in question can only be granted to
German subsidiaries which, as legal persons, are subject to unlimited tax
liability, which thus restricts the freedom to choose the most appropriate
legal form for the pursuit of activities in another Member State, which the
second sentence of the first paragraph of Article 52 of the Treaty expressly
confers on economic operators."
"The
difference in treatment to which branches of non‑resident companies are subject
in comparison with resident companies as well as the restriction of the freedom
to choose the form of secondary establishment must be regarded as constituting
a single composite infringement of Articles 52 and 58 of the Treaty."
[Paras. 42-43]
The
Court also rejects Germany's argument that the impact of bilateral tax treaties
with non-member countries lies outside the sphere of Community competence. The
Court concedes that, in the absence of unifying or harmonizing measures adopted
at the Community level, the Member States retain their competence to decide on
the criteria for taxing income and wealth so as to get rid of double taxation
by treaty.
"According
to the settled case‑law of the Court, although direct taxation is a matter for
the Member States, they must nevertheless exercise their taxation powers
consistently with Community law. In the case of a double‑taxation treaty
concluded between a Member State and a non‑member country, the national
treatment principle requires the Member State which is party to the treaty to
grant to permanent establishments of non‑resident companies the advantages
provided for by that treaty on the same conditions as those which apply to
resident companies." [Paras. 57-58]
Citation:
Compagnie de Saint-Gobain v. Finanzamt, Koeln, Case C‑307/97, C‑307/99
(September 21, 1999).
TRADE
U.S.
Department of Commerce not only eases restrictions on exports of U.S.
encryption equipment and software, but also allows exports to non-government
end-users everywhere thus opening up global markets for U.S. encryption
products
Effective
January 14, 2000, the U.S. Department of Commerce, Bureau of Export
Administration, has issued an interim final rule on exports of encryption
equipment. It implements the encryption policy announced by the White House on
September 16 last and simplifies U.S. encryption export rules. The principles
of the new approach entail (1) technical review of encryption products before
sale, (2) a streamlined post-export reporting system, and (3) reviewing exports
of strong encryption to foreign governments. Businesses can export
mass-produced encryption software without restrictions.
In
particular, the Rule amends the Export Administration Regulations (EAR) [15
C.F.R. Parts 734, 740, 742, 770, 772, and 774] to permit the export and
re-export of any encryption equipment and software to individuals, businesses,
and other non-government end-users. It also allows the export and re-export of
retail encryption equipment and software to all end-users. The Rule, however,
does not revoke the restrictions on exports to countries that, in the U.S.
government's view, continue to champion terrorism, i.e., Cuba, Iran, Iraq,
Libya, North Korea, Sudan and Syria.
The
Rule also implements those changes for encryption products brought about by the
Wassenaar Arrangement. [Editorial Note: In 1996, 33 countries concluded the
"Wassenaar Arrangement on Export Controls for Conventional Arms and
Dual-Use Goods and Technologies." It seeks to prevent unauthorized
transfers of sensitive materials that governments can use for military
purposes. See 1999 Int'l Law Update 9]. For example, the Rule does not apply to
64-bit mass market software and commodities.
Citation:
65 Federal Register 2492 (January 14, 2000). [See also Washington Post, January
13, 2000, page E1.]
TRADEMARKS
In
case involving Cuban embargo and assignment of trademark rights for Cuban rum,
Second Circuit holds that U.S. laws and U.S. government agency interpretation
of regulations may override protections accorded by international treaty
The
Cuban company, Jose Arechabala, S.A. (JASA) (owned by the Arechabala family),
had been producing "Havana Club" rum and had owned the "Havana
Club" trademark until the Cuban revolution. The company continued to
export its rum to the U.S. until 1960 when the Cuban government expropriated
its assets. In 1963, the U.S. imposed an embargo on Cuba [see Cuban Assets
Control Regulations (CACR), as amended, 31 C.F.R. Sections 515.101-515.901
(1999)]. The 1996 Cuban Liberty and Democratic Solidarity (LIBERTAD) Act
[Pub.L. No. 104-114, 110 Stat. 785 (1996)] codified the regulations. The
Secretary of the Treasury delegated the authority to administer the Cuban
embargo to the Office of Foreign Assets Control (OFAC) (see 31 C.F.R. Section
515.802).
From
1972 to 1993, the Cuban state enterprise Empresa Cubana Exportadora De
Alimentos y Productos Varios (Cubaexport) exported "Havana Club" rum,
having registered the trademark in Cuba and the U.S. Eventually another Cuban
company formed a joint venture with a French company, Pernod Ricard, and formed
Havana Club Holding (HCH) based in Luxembourg. The trademark was also assigned
to HCH. HCH granted an exclusive license to Havana Club International (HCI)
(based in Cuba).
Because
of the Cuban embargo, HCI has not yet been able to sell "Havana Club"
rum in the U.S. American travelers, however, could buy the rum while in Cuba.
In 1997, Bacardi & Company (a Liechtenstein company headquartered in the
Bahamas) acquired the Arechabala family's rights (if any) to the "Havana
Club" trademark and any remaining assets of the rum business (if any).
In
the instant case, HCH and HCI claimed the rights to the "Havana Club"
trademark and trade name, and sought to enjoin other parties from using it. The
defendants included Bacardi & Company and Bacardi-Martini (based in
Delaware).
In
1995, OFAC issued a license authorizing the assignment of the "Havana
Club" trademark to HCH. After plaintiffs filed this action, OFAC revoked
the license because HCH failed to disclose certain facts. The district court
dismissed the Lanham Act claims for trademark and trade name infringement and
for false advertising. The court found the infringement claims barred by
statutory and regulatory provisions of the Cuban embargo and rejected the false
advertising claim for lack of standing.
The
U.S. Court of Appeals for the Second Circuit affirms. It holds that the Cuban
embargo barred assignment to HCH of the "Havana Club" trademark
registered in the U.S. Furthermore, a statute precludes whatever rights HCI may
have under the General Inter-American Convention for Trade Mark and Commercial
Protection (IAC) [46 Stat. 2907]. (Both the U.S. and Cuba are parties to the
Convention). As for the assignment of the trademark, HCH must provide authority
under U.S. law for the assignment, otherwise the assignment would be void under
the Cuban embargo [see 31 C.F.R. Section 515.201(b)].
One
of HCH's arguments is that Article 11 of the IAC allows for the assignment. The
Article provides: "The transfer of the ownership of a registered or
deposited mark in the country of its original registration shall be effective
and shall be recognized on the other Contracting States, provided that reliable
proof be furnished that such transfer has been executed and registered in
accordance with the internal law of the State in which such transfer took
place." The issue is thus whether the Cuban embargo has abrogated the
rights that Section 11 of the IAC would otherwise protect.
The
U.S. Supreme Court has declared that a later federal statute will not abrogate
or modify a treaty unless Congress has clearly expressed such a purpose. In
this case, Congress' intent is clear. With the Cuban embargo, Congress wanted
to prevent Cuban parties from receiving hard currency and to block the transfer
of assets within U.S. jurisdiction. Furthermore, Congress expected OFAC to
interpret the regulations restrictively so that they would override conflicting
treaty protections.
The
1996 LIBERTAD Act is even stronger evidence of Congress' intent. "...
Congress intended 'to create a 'chilling effect' that will deny the current
Cuban regime venture capital, discourage third-country nationals from seeking
to profit from illegally confiscated property, and help preserve such property
until such time as the rightful owners can successfully assert their claim,'
... In other words, Congress sought to discourage business arrangements like Cuba
export's joint venture with Pernod, the venture that led to both the creation
of HCH and the assignments of a trademark confiscated by the Castro regime from
JASA. (Cit.)."
"By
invoking the 1996 LIBERTAD Act as evidence of Congress' purpose to prohibit the
assignments we do not retroactively apply that Act to prohibit the assignments
in this case. (Cit.) The 1994 assignments are unauthorized because OFAC revoked
the specific license for them ... The LIBERTAD Act is simply evidence of
congressional purpose that the result we reach should prevail over any contrary
arguments, including those based on the IAC." [Slip op. 22-23] Therefore,
HCH has no enforceable rights to the "Havana Club" trademark.
The
Court also refuses to stop Bacardi from using the "Havana Club" trade
name. The IAC protects the use of trade names and permits injunctions against
the use of identical or deceptively similar names. Parties may assert their
rights to trade names and commercial names under the Lanham Act. It provides:
"Any person whose country of origin is a party to any convention or treaty
relating to trademarks, trade or commercial names, or the repression of unfair
competition, to which the United States is also a party ... shall be entitled
to the benefits of this section under the conditions expressed herein ..."
[11 U.S.C. Section 1126(b)]
Shortly
before the bench trial in this case, Congress passed Section 211 of the Omnibus
Act, which provides that "(b) No U.S. court shall recognize ... any
assertion of treaty rights ... for a mark, trade name, or commercial name ...
that was used in connection with a business or assets that were confiscated
unless the original owner ... has expressly consented." [112 Stat. at 2681-88]
Here, the Court applies Section 211 to deny HCH relief on its trade name claim
because when an intervening statute authorizes or affects the propriety of
prospective relief, application of the new provision is not retroactive.
Citation:
Havana Club Holding, S.A. v. Galleon S.A., No. 99-7582 (2d Cir. February 4,
2000).
WAR
POWERS
D.C.
Circuit affirms dismissal of suit by thirty-one Congressmen that challenged
legality of U.S. involvement in NATO's Yugoslavian bombing campaign for lack of
standing by plaintiffs under War Powers Resolution and War Powers Clause
During
the Kosovo conflict in Yugoslavia, thirty-one U.S. Congressmen under the
leadership of Tom Campbell of California challenged the U.S. involvement in the
NATO campaign in Yugoslavia. They alleged that the President had violated the
War Powers Resolution [see 50 U.S.C. Section 1541] and the War Powers Clause of
the Constitution by sending U.S. forces to Yugoslavia.
The
War Powers Resolution requires the President to submit a report within 48 hours
"in any case in which United States Armed Forces are introduced ... into
hostilities or into situations where imminent involvement in hostilities is
clearly indicated by the circumstances," and to "terminate any use of
United States Armed Forces with respect to which a report was submitted (or
required to be submitted), unless Congress ... has declared war or has enacted
a specific authorization for such use of United States Armed Forces"
within 60 days. The Congressmen claim that the President submitted a report
triggering the War Powers Resolution but failed to withdraw from the
hostilities within 60 days.
On
March 24, 1999, President Clinton had announced NATO air and cruise missile
attacks on Yugoslav targets. Two days later he submitted a report to Congress
"consistent with the War Powers Resolution" describing the reasons
for the use of armed forces. On April 28, 1999, Congress voted against a
declaration of war on Yugoslavia and rejected any "authorization" of
the air strikes. On the other hand, Congress voted against requiring an
immediate end to U.S. participation in the NATO operation and voted to fund
that involvement. The conflict ended on June 10 with the Yugoslav agreement to
withdraw its forces from Kosovo and to allow deployment of a NATO-led
peacekeeping force.
The
district court granted the President's motion to dismiss, specifically finding
a lack of standing on the part of the Congressmen. The U.S. Court of Appeals
for the District of Columbia Circuit affirms.
The
U. S. Supreme Court partially answered the question of whether Congressmen have
standing in federal court to challenge the lawfulness of executive actions in
Raines v. Byrd, 521 U.S. 811 (1997). Raines involved a challenge by Congressmen
to the Line Item Veto Act. The Supreme Court held that the petitioners lacked
"legislative standing" to challenge the Act because they can vote to
have the Line Item Veto Act repealed or provide individual spending bills with
a statutory exemption. In Chenoweth v. Clinton, 181 F.3d 112, 115 (D.C. Cir.
1999), the Court held that Congressmen have no standing to challenge the
President's introduction of a program through an executive order rather than by
statute because an adequate majority in Congress could abolish the program.
The
legal barrier against congressional legal challenges, however, has an Achilles
heel. The Supreme Court held in Coleman v. Miller, 307 U.S. 433 (1939), a case
involving the Child Labor Amendment, that Kansas State legislators could
legally challenge the actions of the Kansas Secretary of State and the
Secretary of the State Senate. There, the State Senate was split 20-20 and the
presiding officer of the Senate cast the deciding vote. The Supreme Court found
that the 20 Senators opposing the measure could have defeated it and therefore
had standing. In the instant case, Congress could have passed a law that
blocked the use of U.S. forces in Yugoslavia.
In
addition, the Congressmen in this case claimed that the War Powers Clause of
the Constitution bars a President from using military force except to repel a
sudden attack. Since Congress has legislative authority to call a halt to a
President's war making under Raines, Congressmen may not challenge the
President's war-making powers in federal court. The Court therefore holds that
the Congressmen lacked standing.
Citation:
Campbell v. Clinton, No. 99-5214 (D.C. Cir. February 18, 2000).
WORLD
TRADE ORGANIZATION
WTO
Appellate Body substantially affirms Panel's finding that U.S. tax benefits for
"Foreign Sales Corporations" violate WTO trading rules by, in effect,
providing prohibited export subsidy to U.S. companies
On
February 24, 2000, the Appellate Body of the WTO Dispute Settlement Body issued
its Report on "Foreign Sales Corporations" (FSCs) which essentially
affirms the findings of the original Dispute Settlement Panel. An FSC is
essentially a tax construct under Sections 921-927 of the Internal Revenue Code
that reduces U.S. income taxation. Under Section 921 of the Internal Revenue
Code, "[e]xempt foreign trade income of a FSC shall be treated as foreign
source income which is not effectively connected with the conduct of a trade or
business within the United States."
The
EC had brought the complaint before the WTO on November 18, 1997, alleging that
American FSC rules that grant U.S. income tax exemptions for a portion of
foreign-source income are incompatible with U.S. obligations under the WTO
Subsidies and Agriculture agreements. On October 8, 1999, a Dispute Settlement
Panel (DSP) issued its Report, finding that the FSC measure was at war with WTO
trading rules.
The
Appellate Body first holds (in Part XI) that the DSP had correctly found that
the FSC measure constituted a prohibited export subsidy under Article 3.1(a) of
the SCM Agreement. Secondly, the DSP had erred in concluding that the FSC
measure involved "the provision of subsidies to reduce the cost of
marketing exports" of agricultural products under Article 9.1(d) of the
Agreement on Agriculture. Thus, the U.S. has acted inconsistently with its
obligations under Articles 10.1 and 8 of the Agriculture Agreement by applying
export subsidies, through the FSC measure, in a manner that circumvents U.S.
export subsidy commitments with respect to scheduled and unscheduled
agricultural products.
The
Appellate Body therefore recommends that the U.S. bring its FSC measure into
compliance. It notes that "[a] Member of the WTO may choose any kind of
tax system it wishes — so long as, in so choosing, that Member applies that
system in a way that is consistent with its WTO obligations. ... This is a
ruling that the FSC measure does not comply with all those terms. The FSC
measure creates a 'subsidy' because it creates a 'benefit' by means of a
'financial contribution', in that government revenue is foregone that is
'otherwise due.' This 'subsidy' is a 'prohibited export subsidy' under the SCM
Agreement because it is contingent upon export performance. It is also an
export subsidy that is inconsistent with the Agreement on Agriculture."
(See last two paragraphs of Report).
Citation:
United States - Tax Treatment for "Foreign Sales Corporations"
(AB-1999-9) (WT/DS108/AB/R) (24 February 2000). [See European Union press
release 08-00 (February 24, 2000)].
U.S.
concludes "Open Skies" aviation agreements with Namibia, Portugal,
Dominican Republic, and Burkina Faso. According to a press statement of the
U.S. Department of State, the U.S. and Namibia have concluded an Open Skies
aviation agreement. It will eventually allow unrestricted air services between
both countries. Both countries will apply the terms of the agreement
provisionally until both parties have formally signed the agreement. — The U.S.
and Portugal have agreed on an "Open Skies" aviation agreement during
their negotiations in Washington, D.C. on December 21 and 22, 1999. It will
remove all restrictions on international civil air passenger and cargo
transport between the two countries. Portugal and the U.S. will apply the
agreement provisionally until it officially enters into force. — On December
16, 1999, the U.S. signed a similar Open Skies agreement with the Dominican
Republic. It will enter into force once each party has completed its national
ratification procedures. — On February 9, 2000, the U.S. and Burkina Faso
initialed an Open Skies aviation agreement in Ouagadougou. The agreement allows
unrestricted air service by the airlines of both countries between and beyond the
other's territory. — The U.S. has entered into 43 such Open Skies agreements so
far. This is the first Open Skies agreement that the U.S. has negotiated with a
West African country. Both parties will apply the agreement provisionally until
national implementation procedures have been completed. Citation: U.S.
Department of State Press Statements of (February 9, 2000) (Burkina Faso);
February 4, 2000 (Namibia); December 23, 1999 (Portugal); December 16, 1999
(Dominican Republic).
EU
permits petroleum shipments to Serbian destinations. The EU has amended its
sanctions rules regarding Yugoslavia and Serbia to permit petroleum and
petroleum product shipments to the cities of Nis and Pirot, Kragujevac,
Kraljevo, Novi Sad, Sombor, and Subotica. Citation: 2000 O.J. of the
European Communities (L 35) 8, 10 February 2000.
U.S.
and Nigeria sign Trade and Investment Agreement. On February 16, 2000, U.S.
Trade Representative Charlene Barshefsky and Nigerian Vice President Atiku
Abubakar signed a U.S.-Nigeria Trade and Investment Framework Agreement (TIFA)
in Washington, D.C. The purpose of the Agreement is to develop a structured
dialogue for increasing bilateral trade and investment, including the
negotiation of further trade agreements. It creates a Council on Trade and
Investment with government representatives from both parties. The Agreement is
effective immediately. - Nigeria is the U.S.' second-largest trading partner in
Africa. Citation: U.S. Trade Representative press release 00-12
(February 16, 2000).
As
result of WTO ruling, U.S. and India reach agreement on reducing Indian import
restrictions. A WTO Dispute Settlement Panel held in April, 1999, that
India's balance-of-payment situation did not justify its import restrictions
such as a "Negative List" containing almost all consumer goods and
requiring a case-by-case import license. The WTO Appellate Body upheld the
Panel findings (see 1999 Int'l Law Update 122). On December 28, 1999, the U.S.
and India reached an agreement for India to lift import restrictions that it
applies to produce, textiles and many consumer products. Under the agreement,
India will lift more than 1,400 of its specific restrictions by April 1, 2001.
India had already reached accords with the EU, Japan and other countries
obligating it to erase these restrictions by April 2003. Citation: U.S.
Trade Representative press release 00-1 (January 10, 2000). [A copy of the
agreement is available in USTR reading room or at USTR website: www.ustr.gov
(see "press releases").]
