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 8 (August).

COMPETITION

In international airline antitrust dispute concerning U.S. routes, Second Circuit finds that Virgin Atlantic failed to show that British Airways’ incentive agreements with corporate clients and travel agencies were anti-competitive

On October 21, 1993, Virgin Atlantic Airways Limited (Virgin) brought antitrust actions against British Airways (BA), alleging that BA’s incentive agreements and ticket bundling constituted predatory business practices, and breached Sections 1 and 2 of the Sherman Act. Virgin produced an expert witness who testified that the net effect of these practices was to postpone Virgin’s initiation of flights to San Francisco, Washington, DC, Chicago, Los Angeles, and New York. The New York federal court gave summary judgment to BA. Virgin appeals, claiming that the district court misunderstood the economic analysis of its key expert and applied the wrong legal standards.

The U.S. Court of Appeals for the Second Circuit affirms. Virgin had alleged the incentive agreements used by BA whereby travel agents and corporate customers receive commissions or discounts once they have reached a sales threshold, unreasonably restrained trade and offended against Section 1 of the Sherman Act. To substantiate this Sherman Act claim, Virgin had to show (1) that there was some form of concerted action between at least two legally distinct economic entities; and (2) that such conduct impeded trade either per se or under the “rule of reason.”

The Court finds, first, that Virgin did not produce adequate direct or circumstantial evidence tending toward proof that BA was party “to a common scheme designed to achieve an unlawful objective.” Furthermore, the incentive partners had not agreed to do anything in exchange for the benefits they were receiving. i.e., there were no minimum requirements or purchases, and buyers could choose whichever flight they found most suitable.

Second, the Court concludes that Virgin failed to show that BA’s practices were illegal per se. Without being able to claim reduced output and elevated pricing, a plaintiff cannot substantiate an allegation of an adverse effect on competition as a whole in the pertinent market. Moreover, Virgin never put forth an alternative means by which BA could have achieved its goals without hampering competition. Lastly, BA came up with a pro-competitive rationale for its actions, contending that rewarding its most loyal customers fosters competition within the market.

Third, the Court disagrees with Virgin’s allegation that BA’s bundling of ticket sales amounted to a predatory business practice. Virgin’s expert witness testified that the losses incurred by BA through the selling of tickets below cost was an attempt to lure customers from other airlines to BA and that it made up the losses by raising prices on connecting flights. Virgin alleged that such attempts to monopolize the market violated Section 2 of the Sherman Act.

The Court found that Virgin again failed to show it had adequate evidence (1) that BA was taking part in predatory or anti-competitive conduct, (2) that BA intended to monopolize the market, and (3) that BA could probably achieve monopoly power. A company is not guilty of predatory conduct merely by excluding its competitors from the market by utilizing competitive advantages legitimately at its disposal.

A monopolist “presumably always charges the highest available price to maximize its profits without attracting competitors to enter the market.” Virgin had no proof that BA was unreasonably elevating prices for tickets on other routes specifically to compensate for losses incurred by slashing transatlantic air fares. The Court notes that “predatory” pricing can lower aggregate prices within a market, and therefore can benefit customers.

Virgin’s claim of BA’s monopoly leveraging in violation of Section 2 of the Sherman Act also fails. Virgin again did not submit adequate proof to show that BA (1) possessed monopoly power in one specified market, (2) used that power to gain a competitive advantage over Virgin in another distinct market, and (3) caused injury by such anti-competitive conduct. Virgin omitted to define the flight market in which BA allegedly had tried to leverage a monopoly. Finally, the Second Circuit notes that U.S. antitrust laws, including the Sherman Act, seek to protect competition, and not individual competitors.

Citation: Virgin Atlantic Airways Ltd. v. British Airways Plc, 257 F.3d 256 (2d Cir. 2001).

FREEDOM OF INFORMATION ACT

District of Columbia Circuit rules that Department of State and Central Intelligence Agency need not release agency records under Freedom of Information Act that relate to human rights violations allegedly committed by Bosnian Serb forces during summer of 1995

According to an article published in the New York Times, U.N. Ambassador Madeleine Albright informed the Security Council, in a closed-door session on August 10, 1995, that there was evidence that Bosnian Serbs in the town of Srebrenica may have murdered 2,000 to 2,700 missing Bosnian Muslims the preceding month. Ambassador Albright allegedly documented the charges by showing classified spy satellite and spy plane photographs reportedly showed freshly dug mounds of earth where Bosnian Serbs had collected and killed Muslim families.

In October of 1995, Students Against Genocide (hereinafter SAGE), requested the Department of State (DOS) and the Central Intelligence Agency (CIA) to produce four types of records pursuant to the Freedom of Information Act (FOIA). The categories included: (1) all satellite photos taken in the Srebrenica area of Bosnia after July 11, 1995; (2) documents shared with the Security Council on August 10, 1995; (3) any documents pertaining to war crimes, genocide and atrocities committed in Bosnia beginning in 1993; and (4) information concerning rape and other violations of the Geneva Conventions.

When the DOS and CIA declined to turn over the requested documents, SAGE filed a FOIA complaint with the U.S. District Court for the District of Columbia in 1996. The district court gave summary judgment to the DOS and CIA and SAGE noted an appeal. The U.S. Court of Appeals for the District of Columbia Circuit affirms.

SAGE made several arguments regarding its Category 1 request. SAGE first urged that because the agencies initially released numerous photos regarding the alleged massacre, releasing the other pertinent images would not further harm national security. The Court disagrees with this argument pointing out that the assessment of harm to intelligence sources and national security is “entrusted to the Director of the Central Intelligence, not to the courts.” Fitzgibbon v. CIA, 286 U.S. App. D.C. 13, 911 F.2d 755, 766 (D.C. Cir. 1990).

SAGE further contended that, by displaying the images during the Security Council meeting, Ambassador Albright had waived the government’s ability to invoke FOIA exemptions. FOIA provides that releasing protected information into the public domain estops the government from relying on these exemptions The Court holds, however, that the government did not release the photographs in question to the general public and there is no public record of the evidence to support the SAGE’s argument.

Finally, SAGE argued that the agencies could create new photographs of the same images using differing resolution in order to mask reconnaissance capabilities. On the contrary, the Court rules that, although agencies are required to provide any reasonably segregable, non-exempt parts of an existing record, FOIA does not demand that it create new documents.

As to Category 2 items, SAGE maintained that it was entitled to obtain relevant documents the government had shared with the Security Council. The Court holds, however, that an agency official does not waive FOIA exemptions by discussing classified documents with the public.

Finally, in the Category 4 request (SAGE having dismissed its request for documents listed in Category 3), SAGE argued that the DOS failed to produce specifically requested letters already sent by DOS Officials to the Center for Constitutional Rights. The DOS moved to dismiss this request on the ground of mootness because the government had already handed over all documents in question. The Court agrees. Nevertheless, it remands the case to the district court for its determination of SAGE’s claim for attorneys’ fees and costs in connection with its Category 4 request. As to the all other requests, the Court upholds the district court’s grant of summary judgment to the government.

Citation: Students Against Genocide v. Department of State, 257 F.3d 828 (D.C. Cir. 2001).

IMMIGRATION

In 5-to-4 vote, U.S. Supreme Court develops procedural framework for meeting due process standards with respect to removable aliens held in custody where government is having difficulty in finding nations willing to accept them

When an alien who enters the U.S. but no longer has the legal right to remain, the Immigration and Naturalization Service (INS) institutes removal proceedings. Under the statutes, the INS may hold the alien in custody for a ninety-day removal period. If the INS has been unable to make adequate arrangements for the alien within that period, the statute authorizes further detention or supervised release which is open to administrative review.

Kestutis Zadvydas is a resident alien. He was born in a German displaced persons camp, seemingly of Lithuanian parents. Because of his criminal record, U.S. authorities ordered his deportation. Unfortunately, neither Germany nor Lithuania was willing to take Zadvydas because he could not show that he was a citizen of either nation. The INS was also unsuccessful in trying to send him to the Dominican Republic, his wife’s native country.

After the ninety-day period had run out and Zadvydas was still in custody, he petitioned for a writ of habeas corpus under 28 U.S.C. Section 2241. The district court issued the writ. It held that the government would never be able to remove Zadvydas, thus making his loss of freedom unconstitutionally permanent. The Fifth Circuit, however, reversed, reasoning that Zadvydas’ detention did not contravene the Constitution, eventual deportation was not impossible, the government was still making good faith efforts to remove him and there was administrative review of his detention.

Kim Ho Ma (Ma), born in Cambodia, is a resident alien to be removed based on an aggravated felony conviction. Finding himself still in custody after the ninety-day period had run out, Ma successfully sued out a habeas writ. The court reasoned that post-removal-period detention violated the Constitution unless there is a realistic chance of actual removal. That did not exist for Ma because Cambodia lacked a repatriation treaty with the U.S. The Ninth Circuit affirmed. It allowed for a reasonable period of detention beyond ninety days but held that the lack of a repatriation treaty had caused that period to run out. The U.S. Supreme granted certiorari and then vacates and remands in a 5-to-4 vote.

First, the Court affirms that statutory changes in the immigration laws did not purport to affect Section 2241 habeas proceedings. They continue to remain available to obtain judicial review of the legality of petitioners’ detentions, whatever limitations the immigration laws may seem to impose.

In light of constitutional mandates, the courts have to see a reasonable time limit as implicit in the removal setting rather then recognize the possibility of indefinite detention. The present proceedings are not criminal and punitive but civil in nature. The government has produced no justification strong enough to support indefinite civil detention under the INS statutes.

The government developed two justifications for continued detention: (1) prevention of flight; and (2) protection of the community. The first falls short where removal seems a remote possibility. The courts have upheld the second ground of preventive detention only where some special factor such as mental illness combines with dangerousness. Here, the aliens’ removal status has no connection to dangerousness. Moreover, the limited availability of administrative review where the alien must show that he or she is not dangerous coupled with the government’s theory that no judicial review is available raises serious constitutional concerns.

Once an alien enters the U.S., he triggers Due Process Clause protections whether his or her presence is lawful or unlawful, permanent or temporary. Congress’ plenary power over immigration law does not require the courts to ignore its constitutional limits. An alien’s liberty interest is powerful enough to create major constitutional difficulties with indefinite detention. Congress might have saved the day by clearly and intentionally give the Attorney General the power to detain indefinitely an alien ordered to be removed but the majority is unable to find any such indication in the legislative history or in similar related statutes.

The federal habeas statutes grant the federal courts the power not only to decide whether detention after the ninety-day period complies with statute but also to rule on whether the detention is vital to make sure the alien is available at the time of removal. With no prospect of removal, the courts should find further detention unreasonable.

If removal is foreseeable, dangerousness remains relevant to the reasonableness of continued confinement. Other factors include the Executive Branch’s greater expertise on immigration matters, the administrative needs and concerns of the INS and the Nation’s need to speak with one voice on immigration.

In the majority’s view, practicality suggests judicial recognition of a presumptively reasonable detention period. Congress probably did not expect that every single removal could take place within ninety days nor would it likely have deemed a detention period of more than six months to square with the Constitution. For the sake of uniformity, the Court then decides that six months is a proper presumptive period. When the six months have expired and a detained alien proves there is no meaningful probability of removal in the rationally foreseeable future, the government must come up with enough evidence to rebut that showing.

“The Fifth Circuit held Zadvydas' continued detention lawful as long as ‘good faith efforts to effectuate ... deportation continue’ and Zadvydas failed to show that deportation will prove ‘impossible.’ (Cit.) But this standard would seem to require an alien seeking release to show the absence of any prospect of removal ‑‑ no matter how unlikely or unforeseeable ‑‑ which demands more than our reading of the statute can bear. The Ninth Circuit held that the Government was required to release Ma from detention because there was no reasonable likelihood of his removal in the foreseeable future. (Cit.) But its conclusion may have rested solely upon the ‘absence’ of an ‘extant or pending’ repatriation agreement without giving due weight to the likelihood of successful future negotiations. (Cit.) Consequently, we vacate the decisions below and remand both cases for further proceedings consistent with this opinion.” [2505]

Citation: Zadvydas v. Davis, 121 S.Ct. 2491, 150 L.Ed.2d 653 (June 28, 2001).

INTERNATIONAL COURT OF JUSTICE

In case of Germany v. United States, International Court of Justice rules that U.S. had failed to comply with binding provisional order to stay execution of German national and had breached Consular Convention in failing promptly to notify two German nationals of rights to contact German consular officials

Two brothers, Karl and Walter LaGrand, were German nationals and permanent residents of the United States since childhood. In 1982, Arizona state authorities arrested them for taking part in a bank robbery attempt that led to the murder of the bank manager and serious injury to another bank employee. Two years later, an Arizona court convicted the two brothers of first degree murder and imposed the death sentence.

It is undisputed that the Vienna Convention Relating to the Duties, Rights, Prerogatives, and Immunities of Consular Agents, 47 Stat. 1976, T.S. 843, 155 L.N.T.S. 291 (in force for U.S., February 8, 1932) required the American authorities to notify these German citizens without delay of their right to get in touch with the German consulate and that this warning did not take place. It was not until 1992 that the defendants found out about their Convention rights, apparently from other German prisoners. At that point, the American doctrine of procedural default prevented them from attacking their convictions based on the violation of their Convention rights. On February 24, 1999, Arizona authorities executed Karl LaGrand.

Walter LaGrand’s execution was set down for March 3, 1999. The day before, Germany brought the instant case against the United States to the International Court of Justice (ICJ). Pursuant to Article 41 of the Court’s Statute, the ICJ issued a provisional order the next morning. It enjoined the U.S. to take all measures at its disposal to delay the execution pending a final decision by the ICJ. After the U.S. Supreme Court declined to order a last-minute stay, Arizona executed Walter LaGrand later the same day.

The relevant provision of the Consular Convention is Article 36, paragraph (b). It provides that “if he [the arrested foreign national] so requests, the competent authorities of the receiving State shall, without delay, inform the consular post of the sending State if, within its consular district, a national of that State is arrested or committed to prison or to custody pending trial or is detained in any other manner. Any communication addressed to the consular post by the person arrested, in prison, custody or detention shall be forwarded by the said authorities without delay. The said authorities shall inform the person concerned without delay of his rights under this subparagraph...” [emphasis supplied]

Before the ICJ, Germany asserted its own rights as the state of the defendants’ nationality as well as the individual rights of the LaGrand brothers “as a matter of diplomatic protection.” Despite preliminary jurisdictional objections from the U.S., the Court finds that the dispute involves the interpretation of the Convention within the Optional Protocol to the Convention on Consular Relations Concerning the Compulsory Settlement of Disputes, 21 U.S.T. 325, T.I.A.S. 6820, 596 U.N.T.S. 487 (in force for U.S. on December 24, 1969). Moreover, where the ICJ has jurisdiction to decide the merits of a case, it also has jurisdiction to determine whether a party has complied with an order that sought to preserve the rights of the parties to this dispute.

As to the admissibility of Germany’s contentions, the U.S. argued that in several submissions, especially its criticism of the “procedural default” rule, Germany was asking the ICJ to act as a super court of appeals able to correct claimed violations of U.S. domestic law and alleged errors of judgment by the American courts in domestic criminal proceedings. The ICJ disagrees. In its view, Germany was merely seeking to have the Court apply the relevant rules of international law to the disputed issues as mandated by Article 38 of the ICJ Statute.

Nor does the Court see merit in the U.S. complaint about Germany’s failure to formally raise the Convention issue until a short time before the respective execution dates. In its view, such a complaint does not sit well coming from the U.S. authorities which had admittedly failed to notify the brothers of their rights “without delay.”

The Court also rejects U.S. arguments based on evidence that the German courts have occasionally breached the Convention in domestic criminal law. Noting that remedies for violations may well vary according to the severity of the penalty involved, the Court declares that, unlike this case, the cited instances involved relatively light and (to some extent) reversible criminal penalties.

On the merits, the Court concludes that the breach by the U.S. of Article 36, para. 1(b) under the circumstances of this case did lead to breaches of other Article subdivisions dealing with the opportunity of consular officials, e.g., to obtain and assist counsel in representing their nationals. In this case, the lack of prompt notification that murder charges and then death sentences were pending against the LaGrand brothers disabled Germany from providing these services between 1982 and 1992. Analyzing the text of Article 36 convinces the ICJ that it not only creates rights in the foreign state as such but also in the sentenced individuals.

As to the “superappellate-court” objection by the U.S., the ICJ quotes Article 36, para. 3 of the Convention. It declares that: “[t]he rights referred to in paragraph 1 of this article shall be exercised in conformity with the laws and regulations of the receiving State, subject to the proviso, however, that the said laws and regulations must enable full effect to be given to the purposes for which the rights accorded to under this article are intended.” The ICJ determines that, under the circumstances of this case, the procedural default rule barred “full effect [from being] given to the purposes for which the rights accorded under this article are intended,” and thus violated paragraph 2 of Article 36 with respect to both Germany and the two individuals.

On the important issue of the binding effect of the ICJ’s provisional orders issued ex parte on the day of the second execution, the ICJ’s Statute allows the Court to issue provisional measures to preserve the status quo. Article 41, para. 1 provides that “[t]he Court shall have the power to indicate, if it considers that circumstances so require, any provisional measures which ought to be taken to preserve the respective rights of either party.”

Although the equally authentic French version of the Article differs slightly from the English text, customary international law dictates that the Court seek the interpretation that would best achieve its object and purpose. Measures demanding a stay of Walter LaGrand’s execution pending the ICJ ruling on the merits were clearly the only way to preserve that party from irreparable injury. Moreover, binding effect also arises from the well settled customary international law principle that the parties to a case must eschew any measure that would hamper the execution of the Court’s final judgment or that would aggravate or extend the dispute.

Finally, despite a degree of ambiguity, Article 94 of the United Nations Charter imposes an obligation upon each member state to comply with “decisions’ of the ICJ to which it is a party. That the Article also gives one party the option to take the noncomplying party to the Security Council for enforcement does not rule out the mandatory nature of the Court’s provisional measures. Based on the record, the Court concludes that U.S. federal and state executives and judiciaries failed to take all the steps that could have been taken to comply with the stay measure.

As to Germany’s fourth submission, the ICJ finds that the apology and assurances by the U.S. that it is actively engaged in making sure that law enforcement authorities are aware of their obligations under Article 36 of the Convention are adequate as far as they go. The Court also stresses that it has not found that any provision of U.S. law is inconsistent with the Convention. For future cases involving serious criminal penalties against German citizens, however, the Court requires the U.S. to apply its law in such a way as to consider the merits of any alleged violations of Article 36. It leaves the choice of means, however, to the United States.

In the third finding in its operative paragraph (para. 128), the Court finds, 14 to 1, that, “by not informing Karl and Walter LaGrand without delay following their arrest of their rights under Article 36, paragraph 1 (b), of the Convention, and by thereby depriving the Federal Republic of Germany of the possibility, in a timely fashion, to render the assistance provided for by the Convention to the individuals concerned, the United States of America breached its obligations to the Federal Republic of Germany and to the LaGrand brothers under Article 36, paragraph 1."

In its fifth finding, the Court rules, 13 votes to 2, that, “by failing to take all measures at its disposal to ensure that Walter LaGrand was not executed pending the final decision of the International Court of Justice in the case, the United States of America breached the obligation incumbent upon it under the Order indicating provisional measures issued by the Court on 3 March 1999.”

Citation: LaGrand Case, (Germany v. United States of America), International Court of Justice, Press Releases and Summary 2001/16 & 2001/16 bis, June 27, 2001. [Full text of Judgment and of opinions is available on Court's website: (http://www.icj‑cij.org).

PATENTS

In international patent dispute involving therapeutic plant extract, Federal Circuit finds no conflict between French court decisions enforcing intent of parties to foreign development contract and U.S. patent law, and affirms summary judgment for failure to join all patent co-owners as plaintiffs

In April 1985, the Societe Civile D’Investigations Pharmacologiques D’Aquitane of Bordeaux, France (hereinafter “SCIPA”), entered into a joint development contract, concerning the development of new products for medical use, with Horphag Overseas Limited of the English Channel Islands (hereinafter “Horphag”). The contract specified that the parties would jointly file any patent applications resulting from said collaboration. The contract clearly stated that any litigation concerning the interpretation or implementation of the contract would remain under the exclusive jurisdiction of the courts of Bordeaux, France.

On April 9, 1985, a United States patent application (‘360 patent) was filed, listing Jacques Masquelier of SCIPA as the sole inventor of a method for extracting an active ingredient from plants able to counteract the aging of cells. Eight days prior to this filing, Masquelier had assigned his rights in the prospective ‘360 patent to SCIPA and Horphag. In 1994, SCIPA further granted its rights in this ‘360 patent to International Nutrition Company of Liechtenstein (hereinafter “INC”). Horphag filed suit in the Bordeaux court the following year to void the assignment to INC. In 1996, Masquelier reconfirmed his assignment to INC of any rights that may revert to him.

The Bordeaux court held that the 1994 assignment of rights was void. Masquelier had violated French statutes barring joint owners from unilaterally assigning or granting their ownership stakes in patents. Furthermore, the court also voided the 1996 confirmatory assignment of rights on the grounds that Masquelier had lost these rights the first time he assigned them in 1994. Since INC had received no interest in the ‘360 patent from Masquelier’s void assignment of rights, it therefore retained no rights regarding the ‘360 patent.

INC brought suit in the Connecticut federal court, alleging copyright infringement of the ‘360 patent by Horphag and other affiliates. The court extended international comity to the Bordeaux decisions because they had the power to determine ownership interests under the joint development contract, and because they were not seriously contrary to American principles of law. The district court further found that INC retained no ownership interest in the ‘360 patent and therefore lacked the ability to bring claims of copyright infringement against Horphag. An appeal followed.

The U.S. Court of Appeals for the Federal Circuit affirms the district court decision to extend international comity to the decisions reached by the Bordeaux courts. In particular, the Court finds (1) that the Bordeaux courts are courts of competent jurisdiction, (2) that granting comity would not violate the laws and public policy of the forum state and its residents and (3) that the Bordeaux court abided by fundamental standards of procedural fairness. These factors justified the U.S. district court in declining to exercise jurisdiction in a case already adjudicated in France.

The Court rejects INC’s argument that infringement of a U.S. patent requires adjudication under U.S. patent law. The French court retained proper jurisdiction to determine who owned the U.S. patent based upon a French contract, and had decided that INC did not, in fact, own the referenced U.S. patent.

The Court further upholds the Bordeaux court’s decision nullifying SCIPA’s 1994 attempted share assignment. French Intellectual Property Law provides that joint owners generally may assign their respective shares at any time.

On the other hand, the remaining joint owners retain the right of preemption for three months from the date one of the parties makes known its intent to divest itself of ownership. SCIPA’s 1994 assignment took place without notice to Horphag, thereby preventing Horphag from asserting its rights of preemption, and rendering the referenced assignment void.

Furthermore, the Court agrees that Masquelier could not assign any greater interest in 1996 than he possessed at that time. By assigning equal portions of his interest in 1985 to SCIPA and Horphag, he relinquished any ownership interest in the future ‘360 patent, leaving him no interest to assign in 1996.

Citation: Int’l Nutrition Co. v. Horphag Research Ltd., 257 F.3d 1324 (Fed. Cir. 2001).

PRETRIAL DISCOVERY

Rejecting claims of privilege, English Court of Appeal dismisses appeal from order to produce English translations of Japanese documents from plaintiff’s files which plaintiff’s attorneys had selected for translation as relevant to pending regulatory and litigation proceedings involving plaintiff in U.K., U.S., and Japan

In December 1995, the U.S. Commodity Futures Trading Commission (CFTC) subpoenaed Sumitomo of Japan requiring it and its U.S. subsidiary to provide details about their copper trades and to turn over various types of documents dealing with those trades. Sumitomo hired the U.S. law firm of Paul, Weiss, Rifkind, Wharton & Garrison (PW) to represent it. The following month, the U.K. Securities and Investment Board (SIB) also began looking into Sumitomo’s copper trading. PW also represented Sumitomo in this inquiry.

Between 1985 and 1996, a Mr. Hamanaka was working for Sumitomo of Japan as head of a team trading on the copper cash and futures markets. In June 1996, Hamanaka confessed that his unauthorized trading had caused Sumitomo to lose $2,600,000,000.

Soon after the Hamanaka confession, investors brought a class action against Sumitomo in New York. All in all, Sumitomo, either as plaintiff or defendant, became party to at least 24 civil actions in the U.S., the U.K. and Japan arising out of Hamanaka’s activities. These regulatory and judicial proceedings involved delving into Sumitomo’s copper trading activities and into the aid that third parties may have given to Hamanaka in the execution and camouflaging of his alleged schemes.

Both before and after the confession, PW was gathering some 6,900,000 pages of documentation, mostly in Japanese. Aided by translators, a PW legal team spent many months going through these documents and imaged about 4% of the total into a PW litigation database as potentially relevant to regulatory and litigation proceedings. Part of the attorneys’ review process involved deciding to make refined translations of about 5,000 higher priority documents, consisting of about 30,000 pages or 0.4% of the whole.

Since October 1998, Ashursts (Sumitomo’s British law firm) chose about twenty Japanese documents for translation into English by a Mr. Sugiyama, a senior assistant solicitor with that firm. In addition to some overlap with the PW translations, there were new translations. Ashursts also sent five Japanese documents to PW for translation. This activity presumably related to the pending U.K. lawsuit brought by Sumitomo in July 1999 against Credit Lyonnais Rouse Ltd. (CLR).

Plaintiff charged that defendant had acted as clearing house and furnished credit for many of Hamanaka’s unlawful transactions in 1993 thus aiding him in breaching his employment contract. This series of actions allegedly caused $247,000,000 in losses to plaintiff. Defendant denied any wrongdoing, claiming that Sumitomo knew of, and authorized, Hamanaka’s actions.

In February 2000, defendant’s solicitors proposed, to save time and much money, that each party disclose their translations of foreign language documents to the other, without prejudice to questions of accuracy. Plaintiff objected, claiming privilege as to the 725 PW and Ashursts translations in its custody.

It claimed privilege [1] because the translations are original documents which came into being solely for the purpose of litigation, alternatively [2] because they represent a collection of documents selected by Sumitomo's lawyers for the purpose of giving legal advice and/or for the purpose of preparing for litigation. Plaintiff argued that disclosure of the documents chosen by counsel for translation would disclose the nature and direction of their legal theories and advice.

The defendant opposed each of the two grounds for the privilege claim. The Queens Bench Judge nevertheless ordered production and plaintiff appealed. The Court of Appeal (Civil Division), however, dismisses the appeal.

The Court first notes that neither side contends that the original Japanese documents were privileged. It then concludes that, in the absence of some extrinsic element linking the translations with confidential legal advice to a client, the trial judge should have treated the translations no differently than the Japanese originals.

“We agree with the judge that in the context of legal professional privilege there is no relevant distinction to be drawn between a translation of an unprivileged document in the control of the party claiming privilege and a copy of such a document. Each derives solely from the original document, and each is directed at reproducing the sense of, and the information contained in, the original document as exactly and precisely as is reasonably practicable.”

“Neither the process of copying nor the process of translation involves the addition of anything to or the subtraction of anything from the sense of the original document or the information contained in it. In particular, neither process in itself introduces any element of confidentiality which does not or did not exist in the original document.” [para. 44]

The Court further disagrees with plaintiff’s contention that selective translations of foreign documents implicates the attorney-client or “work-product” type of protection. First, it distinguishes between a selection from a client’s own disclosable documents (as here) and a selection from third-party (i.e. undisclosable) documents.

“We think that the question can be tested in this way. Imagine that a solicitor made a selection from his client's disclosable documents in order to obtain the advice of counsel on a point of particular concern. And imagine that the remainder of the disclosable documents were destroyed in a fire. We do not believe that it would be right to ... cloak with privilege the remaining documents.”

“What if the selection was effected by copying the original documents and then all the originals were destroyed by fire? Should the principle ... be extended to cloak with privilege the copies which ... would otherwise be disclosable? We do not believe that it should. A gloss on the principle that a lawyer's advice is privileged from discovery should not result in the right of a party to refuse discovery of documentary evidence that was in the possession of that party before the selection was made, or copies or translations of such evidence.” [para. 76]

In conclusion, the Court points out that just because privilege does not protect a series of documents does not mean that they automatically have to be produced. “The process of discovery is not an uncontrollable juggernaut.” The trial court, therefore, retains a measure of discretion to set terms and conditions on complete or partial disclosures. Finally, the Court is not persuaded that this was a case where the trial judge should have exercised his discretion against ordering disclosure because this might prejudice plaintiff in the many cases to which it is a party in the U.S. There was no abuse of discretion here.

Citation: Sumitomo Corporation v. Credit Lyonnais Rouse Ltd., 2001 WL 753490 (CA), [2001] YWCA Civ 1152 [Ct. App. (Civ.) July 20].

SOVEREIGN IMMUNITY

Ninth Circuit remands international insurance dispute because evidence of record is insufficient to determine whether one of parties is organ of Irish Government within Foreign Sovereign Immunities Act

Icarom (formerly ICI) is a provider of employer’s liability and public liability insurance policies in Ireland, and was once the second largest agency in the industry. In 1985, Icarom’s financial situation became extremely grave, and the government of Ireland foresaw serious economic consequences for the Irish economy if Icarom could not shoulder its financial responsibilities. Ireland acquired Icarom from Allied Irish Banks and created Sealuchis Arachais Teoranta (SAT) through legislation designed to enable the government to hold Icarom shares. All SAT directors are Irish Ministry employees.

An insurance policy dispute landed Icarom (then called ICI) as a defendant in Montana state court in 1990. ICI removed to federal court claiming it was an “instrumentality of a foreign government” as defined in the Foreign Sovereign Immunities Act of 1976 (FSIA) [see 28 U.S.C. Section 1603]. That court granted summary judgment on some claims and tried others.

During the course of the pending appeal, however, Icarom discovered that the prior decision in Gates v. Victor Fine Foods, 54 F.3d 1457 (9th Cir. 1995), seemingly supported its immunity from suit under the FSIA. Thus, the district court appears to lack removal jurisdiction. After further briefing and argument on this issue, the U.S. Court of Appeals for the Ninth Circuit finds that Icarom is not a “foreign state” under the “majority owned” prong of the FSIA. Not having enough facts before it to determine whether Icarom is an “organ” of the Irish government, however, it remands for further proceedings on this issue.

To qualify for immunity under FSIA, the organization being sued must be either (a) a foreign state, or (b) an agency or instrumentality of a foreign state. Icarom, not qualifying as a foreign state, would meet the requirements for classification as an instrumentality of a foreign state if it were (1) an entity that is a separate legal person, (2) an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a U.S. state or created under the laws of any third country.

Icarom argued that it is an instrumentality of a foreign state because SAT owns the majority of its shares. The Court concludes, however, that Icarom fails the “majority interest owned” prong of the FSIA because the Irish government owns it only through SAT, and it is therefore not an organ of a foreign state under this definition. SAT is unquestionably an organ or instrumentality of Ireland, but this does not by default assign “organ” status to Icarom, which occupies a lower position on the tiered corporate structure. Although the Irish government does not directly own a majority of the company’s shares, Icarom may still qualify as an organ of the Irish government if it performs activities on behalf of the Irish government for the public good.

According to Icarom’s claim, it satisfies the “organ” prong of the instrumentality test because Ireland did not acquire Icarom for its profitability. It did so to serve the public interest by intervening in a situation whereby Icarom’s demise could have collapsed the Irish economy. Additionally, Ireland had paid a minimal amount for Icarom and had backed the company with its political and economic resources.

The Court sees further evidence of the ambiguity of Icarom’s status in statements made by its attorney during oral argument. There Icarom’s counsel seemingly conceded that Icarom employees are not public servants, and that the company is subject to suit in Ireland.

In the face of such ambiguity, the Court remands the matter to the district court for further proceedings. If the district court concludes that Icarom is either an instrumentality or an organ of the Irish government, then the district court will retain removal jurisdiction. Otherwise, it should remand the case to the Montana courts.

Citation: EOTT Energy Operating Limited Partnership v. Winterthur Swiss Ins. Co., 257 F.3d 992 (9th Cir. 2001).

WORLD TRADE ORGANIZATION

In “Havana Club” trade name dispute, WTO Panel Report finds that Section 211 of U.S. Omnibus Appropriations Act violates TRIPS Agreement

On August 6, 2001, the World Trade Organization circulated a Panel Report finding that Section 211 of the U.S. Omnibus Appropriations Act [Pub.L. 105-277, Section 101(b), 112 Stat. 2681] is in violation of the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement). Section 211 concerns trademarks, trade names, or commercial names that are the same or substantially similar to those related to businesses or assets confiscated by the Cuban Government on or after January 1, 1959.

In particular, Section 211(a)(2) provides that “[n]o U.S. court shall recognize, enforce or otherwise validate any assertion of rights by a designated national based on common law rights or registration obtained ... of such a confiscated mark, trade name, or commercial name.” This Section was allegedly included in the Act upon request of Bacardi, Ltd., a Bermuda company, to prevent Havana Club Holdings (HCH) from enforcing the “Havana Club” trademark in the U.S.

The European Communities (EC) had brought the complaint on July 7, 1999, claiming that Section 211 denied court access for trademark owners seeking to assert their intellectual property rights.

The present dispute developed out of a Cuban rum trademark, “Havana Club.” Havana Club was originally owned by a Cuban family and abandoned in 1973. In 1976, Cubaexport acquired the trademark and in 1993 sold it to Pernod-Ricard, a French company. Pernod-Ricard is engaged in a joint venture, HCH, with Havana Rum and Liquors of Cuba, to market the Havana Club rum.

The Panel agrees with the EC that Section 211 violates the TRIPS Agreement and that Section 211 should not apply in circumstances where the owner has abandoned the trademark. Thus, the Section should not apply to the Havana Club rum dispute. These portions of the Panel Report open doors for Pernod-Ricard of France to pursue issues concerning registration of the Havana Club rum trademark in U.S. courts.

The EC disputed the remaining portions of the Panel Report decision, specifically the non-inclusion of trade names relative to protection measures afforded by the TRIPS Agreement. The Panel held that the TRIPS Agreement does not decide ownership of intellectual property rights. This interpretation affords wide latitude to individual WTO Members concerning the determination of trademark ownership. The only limitation in this respect is that the trademark in question must comply with all procedural requirements of the TRIPS Agreement.

The Panel held, in particular, that: (1) Section 211(a)(1) is compatible with Articles 2.1, 3.1,15.1, and 16.1 of the TRIPS Agreement; (2) Section 211(a)(2) is inconsistent with Article 42 of the TRIPS Agreement; (3) Section 211(b) does not clash with Articles 2.1, 3.1 and 4 of the TRIPS Agreement.

Therefore, Section 211 nullifies and impairs the benefits accruing to the European Communities under the TRIPS Agreement. The Panel thus recommends that the U.S. bring its laws into compliance with its obligations under the TRIPS Agreement.

Citation: United States - Section 211 Omnibus Appropriations Act of 1998 (WT/DS176/R) (6 August 2001); European Union in US News Release No. 60/01, August 6, 2001.

Mexico issues detailed regulation on movie industry. The Mexican Government has issued a comprehensive regulation regarding the production and distribution of movies in Mexico which affects domestic as well as foreign movies. It notes that the freedom to produce movies requires compliance with labor and intellectual property laws. Although it grants access to federal property for filming movies, it also requires producers who are active in Mexico to provide detailed, annual reports. The agency in charge of entertainment, the Directorate-General of Radio, Television and Movies, must classify all movies and their related advertising before they can be distributed in Mexico. Also, the Directorate-General has to inspect movie theaters. Citation: Reglamento de la Ley Federal de Cinematografia (March 29, 2001).

Brazil enacts statute granting equal rights to women. After almost thirty years of legislative maneuvering, the Brazilian Congress has passed a lengthy statute whose goal is to make women equal to men before the law. In a key provision, for example, the new statute does away with the long-standing notion of “paternal power” which gave Brazilian fathers the unconditional legal right to make all decisions for their families. The new law requires men to share that authority with their wives. The new code takes the place of a 1916 statute that formally approved the hierarchical, patriarchal view of family and sexual relations that was typical in Brazil and elsewhere in Latin America. The current 1988 Constitution purported to guarantee sexual equality for women. The courts, however, tended to keep on applying the 1916 statute since, until now, Congress was unable to implement the new Constitution with a revised statute. With more than 2,000 articles, the new code will probably not go into effect completely until 2003. Its impact upon many existing provisions of law will demand their substantial revision and the drafting of new provisions. Citation: The New York Times Newspaper (Online), August 19, 2001, byline of Larry Rohter, Rio de Janeiro.

U.S. suspends duty-free status granted to Ukraine under GSP. On August 7, 2001, the U.S. decided to suspend the duty-free status extended to Ukrainian products because of allegations of continued piracy of American intellectual property, primarily optical media products such as CDS, DVDs, and CD-ROMs. The Ukraine’s special duty-free status stemmed from the U.S. Generalized System of Preferences (GSP), which was designed to expand economic relations between the United States and developing countries. Countries identified by the U.S. as GSP beneficiaries enjoy duty-free access to the U.S. product market. The Ukraine had previously agreed to address the piracy issue and to carry out more aggressive law enforcement procedures against the practice. It also promised to set up an optical media licensing authority by November 2000. According to the U.S., the Ukraine has taken no action toward these ends. U.S. officials estimate annual losses resulting from Ukrainian optical media piracy at about $200 million. Citation: USTR Press Release 01-61 (August 7, 2001).

Florida jury finds against DuPont in Benlate litigation. On Friday, August 10, 2001, after a five-week trial, a Dade County, Florida, jury awarded two Costa Rican growers, Producturas de Semillas and Palmas & Bambu, a total of $29,500,000 to compensate for damage allegedly caused to their plants by DuPont’s fungicide “Benlate.” Plaintiffs had introduced evidence that Benlate kills, deforms and damages nursery plants, particularly in moist, humid climates. Because the jury also found DuPont, the world’s largest chemical manufacturer, liable under Florida’s anti-racketeering laws, the judge may treble the damage figure to $88,500,000. Announcing it will appeal, DuPont explained the outcome by claiming that judicial rulings that mistakenly kept out key evidence left the jury in a state of confusion. DuPont had stopped making Benlate in April of this year after 32 years on the market. The company has already paid more than $1,000,000,000 in settlements and legal fees arising out of Benlate litigation. In this case, however, DuPont strenuously resisted plaintiffs’ claims of fraud, negligence and product defect. Citation: Associated Press and 2001 CNN America, Inc., filed August 11, 2001, at 2:02 p.m. ET.

Pakistani court condemns blasphemer to death. On August 17, 2001, a Pakistani court in Islamabad sentenced a homeopathic doctor named Sheikh Mohammed Younus to death for blasphemy by uttering insulting statements about Mohammed, the prophet of Islam. Under Pakistani law, those convicted of contemptuous or irreverent comments about Islam, the Koran or the Prophet are liable to capital punishment. Zealots have sometimes killed even those whom the courts have acquitted. There is no known case, however, of an actual execution for blasphemy pursuant to a Pakistani court ruling. Human rights organizations claim that this Islamic state uses the controversial blasphemy law to imprison and otherwise victimize members of minority religions. According to them, hundreds of these religious minorities languish in jail charged with blasphemy. Dr. Younus may appeal the verdict. Citation: Associated Press Report, filed 1:29 p.m. ET, August 18, 2001.

U.S. extends Iran-Libya Sanctions Act for another five years. On July 27, 2001, the U.S. Congress voted to extend the Iran and Libya Sanctions Act (ILSA) for another five years until 2006. The extension allows the U.S. government to penalize any foreign company that invests more than $20 million in the energy sector of either country. President Bush signed the bill into law on August 3, 2001. – The EU and Japan consider the Act an improper extraterritorial application of national laws. The EU has adopted Regulation 2271/96 which is intended to block the effects of ILSA on EU companies. See 1996 O.J. of European Communities (L 309) 1, November 29, 1996. Citation: ILSA Extension Act of 2001, Pub.L. 107-24 [H.R. 1954] (August 3, 2001); European Union in US News Release No. 59/01 (July 31, 2001); Ministry of Foreign Affairs of Japan press release of August 8, 2001.