Legal Analyses written by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
1998
International Law Update, Volume 4, Number 7 (July).
COPYRIGHT
Mexico
issues regulation specifying requirements of Copyright Act
Effective
May 23, 1998, Mexico has issued a regulation that elaborates on the
requirements of the Mexican Copyright Act (Ley Federal del Derecho de Autor)
[see 1997 Int'l Law Update 27].
The
Government agencies in charge of applying the statute and the present
regulation are the Secretary of Public Education (Secretaria de Educacion
Publica) through the National Institute for Authors' Rights (Instituto
Nacional del Derecho de Autor). In certain instances, the Mexican Institute for
Industrial Property (Instituto Mexicano de la Propiedad Industrial) has a
role.
Copyright
protection generally lasts for 15 years.
Certain reasons, however, may justify longer protection such as for
works that need unusually large investments (Title III, Chapter I, Articles 16-17). As for written works by anonymous authors,
parties may copy them if the author's name is unknown or if nobody holds
identified rights to them (Title IV, Chapter I, Article 27). As for movies and audiovisual works, their
contracts must provide for proportional compensation of the authors or holders
of rights (Chapter III, Article 34).
Copyrights
are, however, not unlimited. Mexican
law may restrict their protections or allow use by third parties if it is in
the public interest (Title V, Chapter I, Articles 38-43). The regulation also
contains rules for resolving disputes regarding copyrights, including arbitration
(Title XII).
Citation:
Reglamento de la ley federal del derecho de autor, 1998 Diario Oficial
de la Federacion [Mexican Official Gazette], May 22, 1998.
ECONOMIC
SANCTIONS
U.S.
Department of Treasury issues regulations to implement President's sanctions on
Sudan
On
November 3, 1997, the President issued Executive Order 13067, declaring a
national emergency with respect to the policies and actions of the Government
of Sudan, and blocking all property and property interests of the Sudanese
Government and related entities.
The
Foreign Assets Control Office of the U.S. Department of the Treasury has now
issued regulations to implement the President's declaration of a national
emergency and imposition of sanctions against Sudan (31 C.F.R. 538). They went into effect on July 1, 1998.
Pursuant
to the Executive Order, the new regulations block all property and interests in
property of the Sudanese Government that are in the U.S. or under control of
U.S. persons, including their overseas branches (Section 538.201). The regulations also ban the importation of
goods or services of Sudanese origin (Section 538.204). They also bar U.S. persons from exporting
goods, technology, or services to Sudan (Section 538.206).
Citation: 63
Federal Register 35809 (July 1, 1998).
INVESTMENT
Japan
adopts Limited Partnership Act for venture capital investments to make it
easier for small and medium companies to attract capital
On
May 28, 1998, the Japanese Parliament (Diet) approved the Japanese Limited
Partnership Act for Venture Capital Investment.
The Act tries to make Japanese venture capital more attractive to
domestic and foreign investors by adopting evaluation standards like those used
in the U.S. and Europe.
The
Act defines a "Venture Business" as any joint stock company
(kabushiki kaisha) classified as a "medium or small size enterprise"
(based on the Medium and Small Size Enterprise Basic Act, Law No. 154 of 1963)
or a joint stock company that issues non-registered stock [Article 2, para. 1]. A "Venture Capital Investment Limited Partnership"
is a partnership with general partners and limited partners, established by a
limited partnership agreement for venture capital investment [Article 2, para.
2].
Investors
may use such a Limited Partnership Agreement if the parties make a capital
investment and (a) acquire stock or other securities from a Venture Business,
or (b) acquire industrial property or copyrights (including granting a license
to use such rights), or (c) provide management advice [Article 3, para. 1].
The
agreement must be in writing. It must
also set forth (a) the business activities of the Partnership, (b) the name of
the Partnership, (c) its location, (d) the names and addresses of each of the
partners and their designations as general or limited partners, (e) the price
of one unit of investment, (f) the effective date of the agreement, and (g)
the duration of the Partnership [Article 3, para. 2]. The name of the Partnership must contain the
phrase "Venture Capital Investment Limited Partnership" [Article 5, para.
1].
Each
partner must invest in the form of cash or other assets, and each partner has
to own at least one unit of investment [Article 6]. The general partner(s) run day-to-day
business activities, including accounting and inspections [Articles 7 & 8]. If there are two or more general partners,
they are joint and severally liable for the obligations of the
Partnership. A limited partner is liable
for the Partnership's obligations only to the extent of his/her capital
investment.
The
Act will enter into effect on November 1, 1998.
Citation: 1998
Kanpo [Japanese Official Gazette], 3 June [law published] & 24 June [related
cabinet orders published]. [The English translation of the Japanese Limited
Partnership Act for Venture Capital Investments is available on the website of
the Japanese Ministry of Trade and Industry (MITI), www.miti.go.jp; Information
received from MITI, Division of Enterprise, Small and Medium Enterprise.]
JUDICIAL
ASSISTANCE
In
case of German company's request under 28 U.S.C. § 1782 for production of
evidence to be used in Spanish court action, Third Circuit holds that materials
need not be discoverable under Spanish law; opponent has burden of showing that
materials produced would offend foreign tribunal
Bayer
AG (Germany) holds U.S. and Spanish patents for the antibiotic
ciprofloxacin. During a patent
infringement action against Barr Laboratories, Inc., in the U.S., Bayer found
out that BetaChem, Inc. (New Jersey) had filed an application with the U.S.
Food and Drug Administration (FDA) to sell ciprofloxacin that it received from
Spain. Bayer then filed suit in Spain
against the two Spanish companies making ciprofloxacin. It then asked the U.S. magistrate for
permission to use a "smoking gun document" obtained from Barr in the
Spanish action. The Spanish court stated
that it would receive any document, keep it confidential as allowed under
Spanish law, and determine its admissibility at a later point. Betachem opposed the disclosure of the document
for use in the Spanish action.
Bayer
petitioned the New Jersey federal court under 28 U.S.C. § 1782(a) [assistance
to foreign courts and litigants in obtaining evidence from U.S. persons for use
in foreign proceedings]. BetaChem
opposed the petition. It argued that 28
U.S.C. § 1782 permits discovery only if the material would be discoverable in
the foreign jurisdiction. It also
submitted a legal opinion from a Spanish attorney that, absent a court order,
the material would not be discoverable in Spain. The district court denied Bayer's request
without an evidentiary hearing.
The
U.S. Court of Appeals for the Third Circuit vacates the district court order
and remands due to the absence of any language in the text of § 1782 that
limits its application to cases where the materials would be discoverable in
the foreign jurisdiction, the Court finds that such a requirement would be
inconsistent with the letter and spirit of the statute. If Congress had intended such a requirement,
it would have said so explicitly.
After
reviewing the precedents, the Court concludes that comity concerns against use
of U.S. discovery to evade limitations on domestic pre-trial disclosure by
foreign tribunals apply only when the substance of the discovery is
objectionable. Therefore, the absence of a finding of discoverability is not
enough to deny a §1782 application.
The
party opposing discovery must show facts sufficient to justify the denial of
the application. In determining whether
the materials would offend the foreign tribunal, the district court may
consider any sources presented by the parties, such as statutes and case law
from the foreign jurisdiction.
The
Court therefore remands to the district court for a determination whether use
of the materials would offend the Spanish tribunal. Betachem carries the burden of proof to show
offense or any other facts warranting the denial of Bayer's application.
Citation: In re:
Bayer AG, No. 97-5047 (3rd Cir. June 9, 1998).
JUDICIAL
ASSISTANCE
Where
Canadian authorities issued Letter of Request for seizure of Swiss bank records
of Canadian citizen, seizure itself governed by Swiss law and not Canadian
Charter of Rights
A
Mr. Schreiber was a Canadian citizen who had an interest in various Swiss bank
accounts. On behalf of the Canadian
Minister of Justice, an official signed a Letter of Request and sent it to the
appropriate legal authority in Switzerland.
The Letter asked the Swiss government to aid it in a Canadian criminal
investigation.
Before
sending the Letter, the Canadian government had not secured a Canadian search
warrant or other judicial authorization for the seizure of Schreiber's bank
records. The Swiss Government cooperated
with the Letter and issued an order to seize documents and records showing
Schreiber's bank accounts.
Schreiber
then brought a special case before the Federal Court to seek an answer to the following question:
"Was the Canadian standard for the issuance of a search warrant required
to be satisfied before the Minister of Justice and Attorney General of Canada
submitted the letter of request asking Swiss authorities to search for and
seize the plaintiff's banking documents and records?"
The
trial judge answered the question in the affirmative. A majority of the Federal Court of Appeal
agreed and dismissed the Attorney General's appeal. The Attorney General of
Canada then filed an appeal in the Supreme Court of Canada. In a 5 to 2 vote, that Court allows the
appeal.
Four
justices reason that the Canadian Charter of Rights and Freedoms only protects
against interferences by actions taken (1) by Parliament and the governments of
Canada, or (2) by the provincial legislatures and governments. The Government of Canada may, of course, take
part in international investigations and proceedings, and these might have
implications for individual rights and freedoms such as those set forth in the
Charter. This fact of international
life, however, does not necessarily trigger the protections of the Charter.
In
this situation, the Canadian government's only relevant action was to send the
Letter abroad. This act by itself did
not call into play Section 8 of the Charter on privacy. No treaty or other obligation bound the Swiss
authorities to respond to it. Based on comity, the Swiss authorities then
agreed to use compulsion to obtain plaintiff's records. Swiss law governed this activity, not the
Charter. Whether Canadian authorities
will be able to use the records as evidence against plaintiff in a Canadian
trial, of course, presents a question of fairness that may call the Charter
into play.
The
Chief Justice concurs in the result but on a different rationale. He first notes that Canadian officials had
prepared and sent the Letter of Request.
They were subject to Canadian legal standards and came within Section 32
of the Charter. As a general
proposition, then, the Charter governs these letters of request.
On
the other hand, before plaintiff could rely on the privacy protections of
Section 8, he must show preliminarily that he had a reasonable expectation in
the privacy of his Swiss bank records.
Plaintiff could reasonably expect that his bank records would retain
confidentiality and freedom from governmental compulsion. In the Chief Justice's view, however, the
situs of the records is decisive.
Plaintiff had deposited his funds in Swiss banks by choice. Therefore, he could not reasonably expect
more privacy than Swiss law affords.
The
two dissenting Justices take issue with the above reasoning. In their view, Section 8 of the Charter
provides for ex ante protection of privacy, not merely an ex post evaluation
after officials have carried out a search and seizure.
Since
Canadian authorities formally initiated the search and seizure process, they
should have obtained judicial preauthorization for the Letter of Request under
Canadian standards. The plaintiff could
reasonably expect no less. After all,
the investigation might well have lead Canadian authorities to prosecute this
Canadian plaintiff for some violation of the Canadian Criminal statutes. Plaintiff clearly had an expectation of
privacy in his bank records and the right to privacy protects people and not
places. Since Canadian authorities
failed to carry out the ex ante requirements of Section 8, the search and
seizure was neither reasonable nor valid.
Citation: Attorney General of Canada v. Schreiber, 158
D.L.R. 4th 577 (Sup. Ct. Can. 1998).
PRIVILEGES
U.S.
Supreme Court rules that person not subject to U.S. prosecution cannot claim
privilege against self-incrimination based on realistic fear of war crimes
prosecutions abroad
The
Office of Special Investigations of the Criminal Division, Department of
Justice (OSI) obtained an administrative subpoena for Aloyzas Balsys, a
resident alien. OSI planned to question
Balsys about his World War II activities for the Nazis between 1940 and 1944
and his 1961 immigration to the United States where he may have lied about
these activities.
Balsys,
however, called upon his Fifth Amendment privilege to avoid compelled
self-incrimination because he feared prosecution for war crimes by Lithuania,
Israel and Germany. [Because of statute of limitations problems, Balsys was
not subject to criminal prosecution in the U.S.].
The
District Court agreed with the OSI that the privilege did not extend that far
and enforced the subpoena. On appeal,
the Second Circuit set the order aside [see 119 F.3d 122]. It held that a witness with a real and
substantial fear of prosecution abroad may claim the privilege in a domestic
proceeding, despite his lack of a realistic fear of criminal prosecution in
the United States.
The
U.S. Supreme Court granted certiorari.
In a 7 to 2 vote, the Court reverses.
As
the Court sees it, the question is whether a criminal prosecution by a foreign
government not subject to this country's constitutional guarantees constitutes
a "criminal case" for purposes of the Fifth Amendment.
Balsys
contrasted the domestically-oriented Sixth Amendment with the Fifth's use of
the broader phrase "any criminal case" as suggesting that the latter
applies to fear of any prosecution in any place. The majority disagrees. They are unable to find clear common-law
precedents or contemporaneous understanding that recognizes inclusion of
foreign prosecution within the Fifth. In
the Court's view, the Fifth Amendment refers only to the fear of prosecution by
the sovereign that the amendment itself binds.
The
majority then discusses the Court's prior cases on whether the Fifth extends to
state prosecutions. The cases recognized
a degree of "cooperative federalism" that would aid both federal and
state authorities in fighting interstate crime.
They
do not, however, support the analogous notion of "cooperative
internationalism." In the Court's
view, the day might come where transnational cooperation has developed to the
point where U.S. federal courts could take into account the fear of foreign
prosecution under the Fifth. Balsys,
however, has not shown that prosecutorial cooperation among the nations has
yet risen to that level.
"That
some testimony will be lost is highly probable, since the United States will
not be able to guarantee immunity if testimony [abroad] is compelled (absent
some sort of cooperative international arrangement that we cannot assume will
occur). ... We therefore must suppose that on Balsys's view some evidence will
in fact be lost to the domestic courts, and we are accordingly unable to
dismiss the position of the United States in this case, that domestic law
enforcement would suffer serious consequences if fear of foreign prosecution
were recognized as sufficient to invoke the privilege." [Slip op. 17]
Two
Justices join the majority opinion only in part. Another Justice files a separately concurring
opinion. On the other hand, two Justices
each dissent in separate opinions in which the other Justice joins.
According
to the first dissenter, the protection against forced self-incrimination is a
landmark in the struggle to abolish torture and to civilize criminal
procedure. This Justice sees no reason
why U.S. interrogators should not respect an examinee's reasonable fear of
foreign prosecution.
The
other dissenter stresses the affront to human dignity of compelled
self-incrimination. He also fails to see
why, if the Fifth Amendment protects against likely state prosecutions, the
same rationale should not include foreign criminal proceedings.
Moreover,
the U.S. and foreign nations do cooperate on a large scale in the matter of
cooperative prosecutions. The Justice
notes the twenty or so Mutual Legal Assistance Treaties in Criminal Matters
that the U.S. has made with other nations, the fifty new extradition treaties
and the number of offices abroad that federal law enforcement agencies
maintain. The U.S. government has a
special office to investigate and deport suspected war criminals. In fact, the U.S. and Lithuania have a
specific agreement to insure mutual assistance in prosecuting alleged war
criminals.
As
with its own states, the U.S. has a large stake in successful foreign
prosecutions of persons like Balsys.
These considerations strongly support application of the Fifth Amendment
to prosecutions abroad.
Citation: United
States v. Balsys, No. 97-873 (U.S. Sup.Ct. June 25, 1998).
SALES
OF GOODS
Eleventh
Circuit rules that Convention on Contracts for International Sale of Goods
lacks parole evidence rule and allows extrinsic evidence showing party's
subjective understandings as to contract obligations of which other party was
aware
MCC-Marble
Ceramic, Inc. (MCC) is a Florida corporation that sells tiles at retail. Ceramica Nuova d'Agostino S.p.A. (CNA) is a
maker of ceramic tiles incorporated in Italy.
At a trade fair in Bologna, MCC and CNA signed a two-sided and
pre-printed contract form in Italian whereby CNA would supply MCC with high
grade ceramic tile at discount.
Later,
MCC sued CNA claiming that the latter failed to fill several months of its
orders. CNA relied on clause 6(b) on the
reverse of the printed contract. In
terms, it allows CNA to suspend or cancel contract obligations upon default or
delay in payments and denies MCC the right to damages.
CNA
counterclaimed for nonpayment for tiles delivered. MCC answered that the tiles were of lower
quality than agreed to, thus entitling it to lower payments proportionately to
the defects. In reply, CNA pointed to
clause 4 on the back of the contract requiring complaints to be in writing and
sent by certified mail. This MCC had not
done.
MCC
did not dispute the underlying facts and both sides agreed that the Convention
on the International Sale of Goods (CISG) [19 I.L.M. 671, reprinted at 15
U.S.C. app. 52 (1997)] applied because the contracting parties are from
different member states. MCC submitted affidavits
from its own CEO plus others from CNA representatives at the Bologna fair
supporting MCC's claim that the parties subjectively intended not to be bound
by the terms on the reverse of the order form.
Nevertheless,
the district court relied on "parol evidence" principles to hold that
the affidavits did not raise a genuine issue of material fact and gave summary
judgment to CNA. MCC then filed an
appeal. The U.S. Court of Appeals for
the Eleventh Circuit reverses.
The
Court first points out that Section 2-202 of the Uniform Commercial Code (UCC)
bars evidence of prior or oral agreements but allows evidence of a course of
dealing, usage of trade or course of performance to explain or supplement the
written contract terms. In contrast,
Article 8(a) of the CISG provides that a tribunal is to interpret a party's
statements and conduct "according to his intent where the other party knew
or could not have been unaware what that intent was."
If
the court has to limit itself to the written terms of the contract, it would
have to affirm the summary judgment for CNA.
The CISG, however, requires consideration of the affidavits from
representatives of both sides on the parties' subjective intents to be bound by
clauses on the reverse side of the contract.
In
the Court's view, this raises an issue of first impression in the Circuit as to
whether the parol evidence rule plays any role in cases involving the
CISG. Though its name belies it, the
rule is one of substantive law rather than of procedure.
Though
the CISG makes no express statement on the parol evidence issue, it readily
allows for enforcement of oral contracts.
In addition, Article 8(3) does explicitly require courts to give
"due consideration ... to all relevant circumstances of the case
including the negotiations..." Read
with Article 8(1) above, this mandates the consideration of parol evidence in
many circumstances.
"This
is not to say that parties to an international contract for the sale of goods
cannot depend on written contracts or that parol evidence regarding subjective
contractual intent need always prevent a party relying on a written agreement
from securing summary judgment. To the
contrary, most cases will not present a situation (as exists in this case) in
which both parties to the contract acknowledge a subjective intent not to be
bound by the terms of a pre‑printed writing. ... Moreover, to the extent
parties wish to avoid parol evidence problems they can do so by including a
merger clause in their agreement that extinguishes any and all prior agreements
and understandings not expressed in the writing." [Slip op. 6]
Citation: MCC-Marble Ceramic Center, Inc. v. Ceramica
Nuova d'Agostino, No. 97‑4250 (11th Cir. June 29, 1998). [The United Nations
Convention on Contracts for the International Sale of Goods opened for
signature on April 11, 1980, S. Treaty Doc. No. 9, 98th Cong., 1st Sess. 22
(1983).]
SECURITIES
In
derivative action against Japanese company, Ninth Circuit finds that holder of
1,246 Depository Receipts lacks standing because under Japanese law he is not
"shareholder"
Harry
Batchelder owned 1,246 American Depository Receipts (ADRs), each reflecting 10
shares of stock of Honda Motor Co. (Japan).
The Depository, Morgan Guaranty Trust Co. of New York, had issued the
ADRs. The Deposit Agreement provides
that Japanese law governs shareholder rights.
He brought a derivative action against Honda, its U.S. subsidiary, and
others, for alleged breach of fiduciary duty, waste of corporate assets, and
other claims.
The
district court dismissed Batchelder's action on several grounds. Based on the Deposit Agreement, Japanese law
determines Batchelder's standing to bring a derivative action and, under that
law, Batchelder is not a "shareholder." Thus he cannot bring a derivative action on
behalf of Honda Japan. Even if
Batchelder could bring such an action, he could not sue the American parties.
The reason is that Japanese law does not recognize "double
derivative" actions or actions against third parties.
Batchelder
appealed but the U.S. Court of Appeals for the Ninth Circuit affirms. It finds it unnecessary to engage in
conflicts-of-law analysis. The U.S.
Supreme Court held in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972),
that courts should enforce choice-of-law and choice-of-forum clauses in freely
negotiated private international agreements.
In the absence of fraud or coercion, U.S. courts routinely enforce
contractual choice-of-law clauses especially when the country of the chosen law
has some nexus with the action.
Even
if the Deposit Agreement's choice-of-law provision did not apply, ordinary
conflicts-of-laws principles would lead to the application of Japanese
law. Under the "internal
affairs" doctrine, the rights of shareholders in a foreign company depend
on the law of the place of incorporation.
Moreover, the internal affairs doctrine applies in double derivative
claims brought on behalf of an American subsidiary.
Furthermore,
under Article 267 of the Japanese Commercial Code (Shohoo) [Law No. 48 of
1899], only "shareholders" have standing to bring derivative
actions. Honda's Japanese law experts
testified that ADR holders are not shareholders of record.
Citation:
Batchelder v. Kawamoto, No. 96-56565 (9th Cir. June 15, 1998).
SECURITIES
Second
Circuit affirms dismissal for lack of prescriptive jurisdiction in securities
fraud case where only links to U.S. were phone calls and facsimiles from
foreign parties to transient Florida visitor
Europe
and Overseas Commodity Traders, S.A. (EOC) is a Panamanian corporation that
invests capital in securities and other ventures. The owner, Alan Carr, is Canadian. Carr had negotiated securities purchases
with foreign parties by phone and fax while he was at his vacation home in
Florida. After his investment suffered
losses, EOC sued various parties from France, the U.K., Luxembourg and the
Bahamas in federal court alleging violations of U.S. securities laws. The district court dismissed EOC's action.
The
U.S Court of Appeals for the Second Circuit affirms. This Circuit applies the "conduct
test" to determine the extraterritorial reach of securities fraud
statutes. Without some additional
factor, a series of phone calls to a transient foreign national in the U.S. is
not enough to establish prescriptive jurisdiction under this test. Without such factors, extraterritorial
jurisdiction would be unreasonable within the meaning of the Restatement of
Foreign Relations Law § 416 [jurisdiction to regulate securities activities]
and § 403 [factors to determine whether prescriptive jurisdiction is
reasonable]. That is especially so where
another country has a clear and strong interest in redressing the wrong.
"In
this case, there is no U.S. party to protect or punish, despite the fact that
the most important piece of the alleged fraud -- reliance on a
misrepresentation -- may have taken place in this country. Congress may not be presumed to have
prescribed rules governing activity with strong connections to another country,
if the exercise of such jurisdiction would be unreasonable in light of the
established principles of U.S. and international law. ... And, the answer to
the question of what jurisdiction is reasonable depends in part on the
regulated subject matter." [Slip op. 40].
The
alleged solicitation, offer and purchase of securities while Carr was in
Florida did not bring this entirely foreign transaction within the anti-fraud
provisions of U.S. securities laws.
Citation: Europe
and Overseas Commodity Traders, S.A. v. Banque Paribas London, No. 96-7900 (2d
Cir. June 4, 1998).
SOVEREIGN
IMMUNITY
In
action by U.S. company against Bank of China, Fifth Circuit finds that
government entity's failure to pay U.S. plaintiff for goods received invokes
commercial activity exception of FSIA because it caused "direct effect"
in U.S.
Voest-Alpine
Trading USA Corp. agreed to sell 1,000 tons of the chemical styrene to the Jiangyin
Foreign Trade Corporation (JFTC) [owned by the Chinese government]. To ensure payment for the styrene, the Bank
of China [a government entity] issued an irrevocable letter of credit with
Voest-Alpine as the beneficiary. Chinese customs officials seized the chemicals
shortly after their arrival at the port of Zhangjiagang. The Bank of China then refused to pay on the
letter of credit because of alleged discrepancies.
Voest-Alpine
sued the Bank in Texas district court
where the Bank alleged that, as a government entity, it was immune from
suit. The district court, however, held
that China's failure to remit the funds was enough to support jurisdiction
based on the "commercial activity" exception of the Foreign Sovereign
Immunities Act [28 U.S.C. § 1605(a)(2)].
On
appeal by the Chinese bank, the U.S. Court of Appeals for the Fifth Circuit
affirms. Under the "commercial
activity" exception of the FSIA, a federal court may lift a foreign
state's sovereign immunity if that state commits an act outside the territory
of the U.S. in connection with a commercial activity of the foreign state
elsewhere and that act causes a direct effect in the U.S.
The
parties do not dispute that the Bank of China is a "foreign state"
engaged in commercial activity. The Bank
of China, however, denies that its act had a direct effect in the U.S.
The
Court, however, disagrees. A financial
loss endured in the U.S. by an American plaintiff qualifies, in the Court's
view. "In short, an effect in the
United States is sufficient to support jurisdiction under the commercial
activity exception so long as it is 'direct' -- with no other modifying
adjectives." [Slip op. 13-14]
Finally,
the Court rebuffs the Bank's argument that the FSIA demands that it carry out a
"legally significant act" within the U.S. Unlike some other U.S. courts, the Fifth
Circuit has not adopted this requirement because the FSIA exception simply does
not mention it. Furthermore, while a
"legally significant act" in the U.S. will certainly cause a direct
effect there, that does not mean that only such acts can cause direct effects
in the U.S.
Citation:
Voest-Alpine Trading USA Corp. v. Bank of China, No. 97-20322 (5th Cir.
June 12, 1998).
SOVEREIGN
IMMUNITY
In
contract suit against cabinet-level Greek officials, Second Circuit holds that
lower court erred in authorizing plaintiffs to depose said officials on issues
of commercial contacts with U.S. under exception to Foreign Sovereign
Immunities Act (FSIA)
Marrecon
Enterprises (Marrecon) is a Liberian corporation and Rosemarie Marra is its
president and sole shareholder. Marrecon
has a nine percent interest in a consortium that parted with $44,000,000 to
obtain a license to run a gambling casino in Athens. About one year later, the Greek government
canceled the license and offered to pay back the money.
Ms.
Marra and Marrecon brought a breach of contract suit against Viso Papandreou,
the Greek Minister of Tourism and other government entities. Defendants moved to dismiss based on a number
of grounds including lack of jurisdiction under the FSIA, lack of personal
jurisdiction, forum non conveniens, and the "act of state"
doctrine.
To
counter the FSIA defense, plaintiffs persuaded the district court to let them
depose Mr. Papandreou and Economy Minister Papantoniou to find out the amount
and type of defendants' U.S. solicitations of American investors in the
casino. The governmental defendants
petitioned the appellate court for a writ of mandamus to vacate the discovery
order. The U.S. Court of Appeals for the
District of Columbia Circuit issues the writ.
The
Court first emphasizes that mandamus is an extraordinary remedy and not a
routine substitute for an appeal from a final adverse decision. Moreover, a sovereign immunity issue requires
more judicial solicitude than an ordinary evidentiary privilege where
appellate courts often review the order of disclosure either by mandamus or by
appeal from a contempt order.
A
claim of sovereign immunity, on the other hand, protects its holder from trial
and the accompanying burdens of litigation.
Thus, a lower court's rejection of an immunity claim entitles claimant
to an immediate appeal. A ruling
allowing substantial discovery on the FSIA claim also deserves inclusion within
this right.
Here,
the suit rests upon the commercial activity involved in the contract and
involves the exception set forth in § 1605(a)(2). Plaintiffs can only rely on this exception if
the commercial activity of the Greek government had "substantial contact
with the United States." Hence, plaintiffs seem to be seeking discovery on
a relevant matter, i.e., the nature and extent of these U.S. contacts.
Nevertheless,
the Court notes that taking the oral depositions of cabinet-level officials is
very unusual. "The Ministers are
the equivalent of cabinet‑level officials.
Principles of comity dictate that we accord the same respect to foreign
officials as we do to our own. Thus,
absent some showing of need for oral testimony from the Ministers, the district
court erred in authorizing their depositions." [254] On this record, plaintiffs made no such
showing.
Moreover,
the lower court failed to consider the cost-effective possibilities of ruling
on other threshold, but dispositive, issues. "Precise calculation will
generally be impossible, and which defense should be decided first is a
question ultimately within the discretion of the district court. A sample decision procedure, which captures
the relevant concerns but may overstate their arithmetic tractability, would be
to eyeball each jurisdictional defense and, for each, divide the estimated
burdens of evaluation by the estimated chance of success, and then evaluate the
defenses in increasing order of the corresponding quotient." [254]
In
casting about for alternative rulings, however, a district court must not
decide issues tied in with the merits of the case in the face of unresolved
challenges to the court's basic power to declare the law. Here, rulings on defendants' motions to
dismiss for lack of personal jurisdiction or for an unconditional finding of
forum non conveniens do not demand subject-matter jurisdiction.
On
the other hand, defendants' "act of state" defense does raise
questions of substantive law relating to the merits. The lower court would have to resolve the
FSIA issues in plaintiff's favor before it could reach this defense.
Citation: In re Minister Papandreou, 329 U.S. App. D.C.
210, 139 F.3d 247 (1998).
TAXATION
Switzerland
issues regulation to implement new Swiss-U.S. double taxation treaty
The
Swiss-U.S. double taxation treaty (Convention Between the Swiss Confederation
and the United States of America for the Avoidance of Double Taxation with
Respect to Taxes on Income) entered into force on December 19, 1997.
The
Swiss Government has issued a federal regulation that lays out specific
procedures and further details for the application of the Treaty in
Switzerland. For example, the regulation
describes the application of the Swiss capital gains tax and refunds of
overpaid amounts (Article 2), as well as relief from capital gains taxes paid
in the U.S. (Article 9).
The
regulation entered into force retroactively on February 1, 1998.
Citation: Ordinance of the Federal Council on the
Swiss-U.S. Double Taxation Treaty (to be published in the Swiss Official
Gazette); Swiss Department of Treasury [Eidgenössisches Finanzdepartment]
press release, June 15, 1998. [The
Swiss-U.S. Tax Treaty is available on the www-Site of the Swiss Embassy in
Washington, D.C., http://www.swissemb.org.].
TELECOMMUNICATIONS
APEC
states conclude telecommunications mutual recognition arrangement (MRA)
The
trade ministers of the 18 Asia-Pacific Economic Cooperation (APEC) nations
(including the U.S., Canada and Japan) in the Asia-Pacific regions have
concluded an agreement on the mutual recognition (MRA) of telecommunications
equipment. It will accelerate technical
testing (MRA phase one) and certification (MRA phase two) procedures, and
limit duplicative testing of telecommunications equipment. It does not, however, require the harmonization
of mandatory technical requirements.
[This
MRA is part of APEC's "early voluntary sectoral liberalization"
initiative. APEC's goal is to achieve
free and open trade and investment in the region by 2010/2020. As part of the strategy, APEC states have
selected nine economic sectors for market opening: chemicals, energy sector
goods and services, environmental goods and services, fish, forest products,
gems and jewelry, medical equipment, toys, and the present mutual recognition
agreement in telecommunication products and systems. The parties agree to phase out tariffs and
other restrictions in all sectors].
The
telecommunications MRA provides a mechanism whereby the exporting country
designates technical "Conformity Assessment Bodies." They will test and certify the conformity of
telecommunication equipment to the importing country's requirements. In particular, it
-
Applies to all equipment subject to telecommunications regulations (wireline
and wireless, terrestrial and satellite).
-
Provides procedures for designating, recognizing and monitoring
"Conformity Assessment Bodies."
-
Requires the parties to accept the results of the procedures carried out by
these "Conformity Assessment Bodies."
-
Establishes a Joint Committee to implement and supervise the application of the
Arrangement.
The
MRA does not by itself create legally binding obligations. Each country must implement the MRA in some
form. The U.S. is planning to exchange
letters to bring the MRA into force as a trade agreement with APEC trading
partners.
In a
related matter, the Federal Communications Commission (FCC) has published a
notice of proposed rulemaking to implement the MRA as well as the
multi-sectoral U.S.-EU MRA [see 1997 Int'l Law Update 111. The U.S. and the EU signed the Agreement on
May 18, 1998]. The FCC is proposing rule
changes, inter alia, to shorten the time it takes for foreign companies to distribute
telecommunications products in the U.S. based on the MRAs (see 63 Federal Register
31685, June 10, 1998).
Citation: U.S. Trade Representative press releases 98-58
(June 5, 1998) & 98-62 (June 23, 1998).
- By
large majority, U.N. Conference in Rome approves permanent International
Criminal Court. On July 17, after a
number of stormy sessions, a mostly jubilant U.N. conference in Rome approved
the "Rome Statute of the International Criminal Court." The vote was 120 to 7, with 21 abstentions. The United States, Israel and China were
among those delegations that voted against the Convention. Even if the executive branch had supported
the Statute, Senator Jesse Helms, Chairman of the U.S. Senate Foreign Relations
Committee, stated that a proposal for an international tribunal that could
prosecute American soldiers for war crimes would be "dead on
arrival" at his Committee. This
would prevent the Senate from giving its consent to a Convention establishing
the Court and the President could not ratify it. The Convention will not
enter into force until ratified by 60 nations.
So far, 26 nations have signed the Convention. Citation: United
Nations press releases L/2890 & L/2889 (July 20, 1998), containing a
summary of the Convention and statements by individual nations; New York Times
News Service, July 18, 1998, lead story by Alessandra Stanley. [The NGO
Coalition for an International Criminal Court maintains a website with relevant
documents at www.igc.apc.org].
- U.S.
and Canada reach agreement on Washington-British Columbia Boundary Area fisheries,
but not in Northern Pacific Salmon dispute. On July 3, 1998, the U.S. and Canada announced
an agreement regarding the 1998 fishing season for the southern fisheries
covered by the Pacific Salmon Treaty. It
limits U.S. fisheries in Washington State and addresses other allocation and
conservation concerns. The U.S. fishing
season for sockeye will start on July 27 and close after the third week in
August or sooner if the U.S. harvest reaches 24.9% of the total allowable catch
of Fraser River sockeye. The U.S. and
Canada, however, were unable to reach a comprehensive interim agreement on
Pacific salmon fisheries for the 1998 summer fishing season in the
Alaska/British Columbia northern boundary area.
Citation: U.S. Department
of State press statements of July 3 & 9, 1998.
- International
Convention on Plastic Explosives Marking enters into force for 38 nations
including U.S. On June 21, 1998, the
Convention on the Marking of Plastic Explosives for the Purpose of Detection
entered into force for the 38 nations that have ratified it. The parties negotiated the Convention within
the International Civil Aviation Organization (ICAO) after the bombing of Pan
Am Flight 103 in 1988. It mandates the
use of chemical markers (the Convention identifies four such markers) in the
manufacture of plastic explosives to make their detection easier by
electronic equipment and search dogs.
The U.S. signed the Convention on March 1, 1991, and implemented its
requirements in the Antiterrorism and Effective Death Penalty Act, Title
VI. The U.S. has selected 2,3
dimethyl-2,3 dinitrobutane (DMNB) as its chemical marker. Citation: U.S. Department of State press statement of
June 22, 1998.
