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 5 (May).

ABSTENTION

Seventh Circuit reverses decision of district court to abstain from exercise of jurisdiction in commercial dispute where related proceedings are pending in Greece because Greek actions do not address all issues of dispute and because permissive forum selection clause in agreement favors Illinois

In 1998, AAR International, Inc. (AAR) leased a Boeing 737 airplane to Vacances Heliades S.A. (VH) for a term of 96 months. VH subleased the plane to another company which in turn subleased it yet another time (jointly referred to as defendants).

In 1999, AAR notified the defendants that they had violated the lease by failing to pay accrued EuroControl charges of approximately EURO 700,000, by removing an engine, and by failing to make a lease payment. AAR terminated the lease shortly thereafter. VH then filed a complaint before the Court of First Instance (CFI) in Athens, Greece against AAR’s parent company and other parties.

The pleadings alleged, among other things, that the airplane had not been properly overhauled. The complaint sought the attachment not only of AAR’s assets in Greece but also of the plane as security for VH’s claims for damages.

Later, VH brought a second action in the CFI against defendants, this time seeking damages for the malfunctioning of one of the plane’s engines. The Greek Court set a hearing for December 14, 1999. On December 13, 1999, AAR sued VH in an Illinois federal court.

On January 25, 2000, the Athens court issued a written “Provisionary Measures Procedure” decision in the first action, ordering the attachment of the assets of AAR’s parent company and the plane. Thereafter, VH brought two more related actions in Athens.

Meanwhile, the defendants moved for the federal court to abstain under Colorado River Water Cons. Dist. v. United States, 424 U.S. 800 (1976), in light of the pending Greek actions or, alternatively, to dismiss the action under the forum non conveniens doctrine. Without addressing the forum non conveniens issues, the district court found that the U.S. lawsuit paralleled the Greek actions and that the Colorado River factors favored abstention.

AAR appealed from the district court’s grant of the defendant’s motion to abstain. The U.S. Court of Appeals for the Seventh Circuit reverses and remands with instructions to vacate the abstention order and to deny appellee’s motion to dismiss on grounds of forum non conveniens.

Under certain circumstances, the Court observes, a federal court may abstain from hearing a case and await the outcome of parallel proceedings either in the U.S. or abroad. Since federal courts generally have an obligation to exercise jurisdiction, Colorado River requires that the circumstances be “exceptional ” for a court to abstain from exercising jurisdiction.

In reviewing abstention orders under Colorado River, the Court must decide, first, whether the federal and foreign proceedings are parallel. The question is whether there is a “substantial likelihood” that the foreign litigation will dispose of all claims presented in the federal case. Here, the district court considered the Greek and U.S. actions parallel because the Greek court had found in an emergency hearing that AAR was liable to the defendants and made a preliminary ruling on damages.

On the other hand, the Court agrees with AAR that the Greek actions focus on the engine failure but not on the defendants’ failure to make the lease payment. Therefore, the Court cannot say that it is substantially likely that the Greek actions will dispose of this issue. Resolving any doubts in favor of federal jurisdiction, the Court concludes that the federal and foreign actions are not parallel.

Second, the Court has to balance the considerations that weigh in favor of, and against, abstention. One of the ten factors that the court must take into account is the comparative inconvenience of the federal forum to the parties. Here, the lease agreement provided for non-exclusive jurisdiction in Illinois and for waiver of any claims “brought in an inconvenient forum.” The lower court erred in failing to rule on whether the lease agreement was relevant to the convenience analysis and whether it barred the defendants from objecting to the inconvenience of an Illinois venue.

Finally, the defendants’ motion for forum non conveniens should be denied. “... [S]ome of our sister circuits have suggested that where the parties to an international dispute agreed to a mandatory forum selection clause, the usual forum non conveniens analysis no longer applies, and the only question remaining for the district court to determine is whether the forum selection clause is enforceable under the standards set fort in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 ... (1972). ... In Bremen, the Court ruled that a freely negotiated mandatory forum selection clause is enforceable unless the party challenging its enforcement can ‘clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching,’ or that ‘trial in the [chosen] forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court.’”

“Applying these standards together with standards articulated in later Supreme Court cases, we have ruled that a forum selection clause is presumptively valid and enforceable unless (1) ‘[its] incorporation into the contract was the result of fraud, undue influence, or overweening bargaining power; (2) the selected forum is so gravely difficult and inconvenient that [the complaining party] will for all practical purposes be deprived of its day in court; (3) [its] enforcement ... would contravene a strong public policy of the forum in which the suit is brought, declared by statute or judicial decision.” [Slip op. 38-40]

The Seventh Circuit has held that a mandatory forum selection clause waives a party’s objection to venue in the chosen forum on the basis of cost or inconvenience to itself. The Court finds that a party similarly waives such objections when it agrees to a permissive forum selection clause which specifically provides for the waiver of convenience-based objections to suits brought in a particular venue. In this case, sophisticated international companies freely negotiated the forum selection clause and waiver provisions. Any inconvenience that VH may suffer was foreseeable at the time it signed the lease.

Citation: AAR International, Inc. v. Nimelias Enterprises S.A., No. 00-2737 (7th Cir. April 27, 2001).

BANKRUPTCY

On petition by bankruptcy Trustee and to assure availability of his assets for creditors, Australian Federal Court grants Mareva injunction regulating widow’s sale of valuable Florida real estate owned by bankrupt former husband at time of his death

Langley George Hancock died on March 27, 1992, owning several valuable properties in Australia and one in Orlando, Florida. In May 1995, the Western Australia Supreme Court granted probate as to the Hancock estate to executors named in his will. Questions later arose as to whether Hancock had been solvent at the time of his death. Pursuant to a creditor’s petition filed by Hancock Prospecting Pty. Ltd. in December 1997, a federal bankruptcy proceeding began. The Federal Court of Australia ordered the estate to be administered under Part XI of the Bankruptcy Act 1966 (Cth) and appointed a Mr. Donnelly as Trustee.

The Trustee alleged that, despite his insolvency, Mr. Hancock had given Mrs. Rosemarie Porteous (the former Mrs. Rose Hancock) $254,129.71 on October 23, 1991 and that this gift amounted to an act of bankruptcy under the statute. If true, bankruptcy administration would relate back to that date. As the Court notes: “[t]his commencement date is significant for the reason, among others, that under s120 of the Act, gifts made within a period of 5 years prior to the commencement date are, subject to one exception, void as against the Trustee. The exception is that a gift made more than two years prior to the commencement date will not be void as against the Trustee if the transferee proves that the transferor was solvent at the time of the transfer.” [Slip op. 2-3]

In essence, the Trustee was trying to recover under s120 of the Act many gifts of money Mr. Hancock had allegedly made to Mrs. Porteous during the five years prior to October 23, 1991 plus interest on these amounts. He alleged also that Mrs. Porteous used some of these funds to invest in various properties in Australia as well as one property in Orlando, Florida. On March 15, 2001, the Trustee moved the Court to issue several injunctive orders to make sure that these properties or the proceeds from their sales are available to satisfy any orders issued in favor of the Trustee.

As to the United States property, the Trustee sought an order restraining respondents or their representatives from selling, charging, mortgaging, encumbering or otherwise disposing of the property located in Seminole County, Florida (the Orlando property) during the pendency of the bankruptcy proceedings without giving 21-days written notice to the Trustee.

Moreover, in the event the Orlando property is sold, the Trustee asked the Court to order that respondents give not less than 21 days’ written notice to the Trustee before the settlement date on the sale. In addition, the Trustee requested that, in the case of a sale of the Orlando property, the Court order the retention of any proceeds of the sale in a joint bank account in the names of the Trustee and of the solicitor for the respondents in an amount equal to the total claims of the Trustee with respect to the Orlando Property plus interest pursuant to the Federal Court Act.

The Court first notes that injunctive relief against the parties to a proceeding focuses on preventing abuse or frustration of the Court’s process. It then points out that a party seeking a Mareva injunction [see Mareva Compania Naviera S.A. v. International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509; [1980] 1 All E.R. 213] must show three elements.

The first element is, that he has a good arguable case or a sufficiently realistic prospect of success in the proceedings. Secondly, the applicant has to show that, without such an order, a real risk exists of inability to satisfy a favorable judgment because a defendant will have hidden or dissipated the assets in question. The final element demands a showing that the balance of convenience requires the entry of the requested order.

In the Court’s view, a vital aspect of a good arguable case here turns on evidence of Mr. Hancock’s insolvency at time of death. The Trustee alleges that, at this point, the deceased was unable to repay debts owed to Clough Building Pty. Ltd., The Hancock Family Memorial Foundation Ltd. and Hancock Mining Ltd. The trustee attached voluminous documentary evidence about Mrs. Porteous’ finances and the gifts she got from deceased. Defendants argued that this so-called “evidence” contains nothing but contested allegations, insufficient to show an arguable case. The Court, however, disagrees.

The Court then considers the danger of dissipation of assets based mainly on a four-day deposition of Mrs. Porteous. At an earlier time, it appears that she may have intended to bring any assets from the sale of the Orlando Property back to Australia.

“The impression created by the whole of the transcript, however, is that Mrs Porteous's life plans are presently rather fluid. The question of her purchasing a French chateau was discussed along with other plans she has for her future. While the particular property might be beyond her reach, the discussion shows that she is not inimical to living overseas. In addition there is, as counsel for the applicant observed, a certain inconstancy of intention. In my opinion there is a strong possibility that Mrs Porteous may alter her plans and deal with the properties in a manner inconsistent with preserving the assets (or their proceeds) in a form accessible to the Trustee.” [Slip op. 17-18]

Finally, the Court decided that, since the parties main dispute was over the amount of interest due, the balance of convenience favors the granting of the Trustee’s motion as to the Orlando Property.

The Court then issues the restraining orders. As to the potential sale of the Orlando Property, and the advance notice of settlement, the Court grants the order essentially in the terms requested above.

With respect to the joint bank account for the proceeds of the sale, the Court’s order reads more specifically as follows: “In the event of sale of the Orlando Property, there shall be retained out of the proceeds of such sale and placed in a joint bank account in the names of the Applicant [Trustee] and the solicitor for the Respondents, an amount of $ 1,590,531.54 together with interest on that amount calculated in accordance with the rates of interest prescribed under Schedule J of the Supreme Court Rules 1970 (NSW) from 8 April 1999 to the date of settlement of such sale.” [Slip op. 22-23]

Citation: Donnelly (Trustee) in matter of bankrupt estate of Hancock (deceased) v. Porteous, [2001] F.C.A. 345, 2001 Aust. Fed. Ct. Lex. 5 (Aust. Fed. Ct., New S. Wales, April 2) (Reed Intl. Books, Aust.).

COMPETITION

In multi-billion-dollar merger where Schneider Electric, S.A., proposed to exchange shares with Legrand, S.A., Paris Court of Appeal surprises European financial world by ruling in favor of minority preferred shareholders of Legrand who claimed that exchange ratio for Schneider shares was too heavily weighted in favor of common shareholders

Schneider Electric, S.A. made a friendly, $7,900,000,000 offer to take over Legrand, S.A. Both companies are in complementary sectors of the electric equipment manufacturing industry. In January 2001, the Conseil de Marches Financiers (CMF), the French market regulator, approved the offer. The merger would create the world’s largest maker of low-voltage electrical distribution equipment.

Led by Colette Neuville, a shareholder activist, who heads the Association de Defense des Actionnaires Minoritaires, the minority shareholders of non-voting preferred shares (ADP) in Legrand went to court. They complained that the deal would have given them only two Schneider shares for each of their shares while the Legrand common-share holders were to get 3.5 Schneider shares for each common share. In a move that surprises most financial observers, the Paris Court of Appeal, on May 3, 2001, annuls the CMF’s approval of the proposed acquisition.

The Court does not directly hold that the exchange ratio was unjust. Instead it overturns the CMF’s ruling because the agency had not explained why it believed that the offer for the ADP shares would be economically reasonable. On the other hand, it had specifically analyzed the economics underlying the offer for common shares.

The Court also notes that the CMF “should have examined the price or the terms of exchanges in the light of objective evaluation criteria usually used and the characteristics of the company under offer.” In the Court’s view, the market looks upon common and preferred stock as constituting two distinct classes of shares. It had been the CMF’s view that the discount on the preferred shares amounted to an objective long-term market factor.

If the companies wish to pursue the merger, they cannot immediately go back to the CMF to secure a more explicit analysis of the original offer. French procedures provide several other options. One would be to make a new offer and to obtain CMF’s approval of it. The companies alternatively could renew the original offer and seek a more specific ruling from the CMF. Finally, they could raise the offer for the ADP shares.

Other challenges may jeopardize the merger. In March, for example, the Directorate on Competition at the European Commission had announced that it would launch an in-depth, four-month long investigation of the massive merger to determine its compliance with European Union standards.

Citations: The Times of London, May 4, 2001, at 29 (Business), 2001 WL 4896674; The Daily Deal, May 4, 2001 (byline of John E. Morris), 2001 WL 20232959.

EXTRADITION

Canadian Supreme Court upholds stay of extradition of Canadian nationals charged with international mail fraud on U.S. residents on grounds that intimidating remarks by American federal judge and prosecutor violated Section 7 of Charter of Rights and Freedoms as well as common law doctrine of abuse of process

In July 1994, a U.S. federal grand jury indicted Harry Cobb and Allen Grossman (appellants), two Canadian citizens and residents, for engaging in a $22,000,000 mail fraud and conspiracy involving gemstones (executed from Canada but involving U. S. residents). At least 25 individuals and 8 corporations took part. Several of their alleged coconspirators had voluntarily returned to face the charges pending in the U. S. District Court for the Middle District of Pennsylvania. The United States then requested Canadian authorities to extradite Cobb and Grossman, among others.

Appellants objected to being extradited, however, on the grounds that it would violate their rights under Section 7 of the Canadian Charter of Rights and Freedoms because of intimidating statements made by the American trial judge and prosecutor. Section 7 provides that: “Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.”

At the sentencing of one of the co-conspirators, the American judge remarked that those fugitives who did not cooperate would get the “absolute maximum jail sentence.” The federal prosecutor also stated during a Canadian TV interview broadcasted just before appellants’ hearing that: “You're going to be the boyfriend of a very bad man if you wait out your extradition.” There is no record showing that the U.S. government has repudiated these remarks.

Although the U.S. had admittedly put forth the necessary prima facie case, the extradition judge declined to order the appellants committed and stayed the proceedings based on the American comments. Represented by Canadian officials, the United States’ request then went to the Ontario Court of Appeal. That Court set aside the stay and sent the matter back to the extradition judge, holding that the lower court should not pre-empt the discretion given to the Minister of Justice as to whether or not to surrender a fugitive pursuant to the United States -- Canadian Treaty on Extradition (as amended 1974) [27 U.S.T. 983; T.I.A.S. 8237.]

The Minister, however, has delayed his decision in the matter until completion of any further appeal. The Canadian Supreme Court allows the appeal.

The Court first points out that the Canadian Charter of Rights and Freedoms controls the application of the extradition treaty, the conduct of the hearing, as well as the exercise of executive discretion as to surrender of a fugitive. The extradition judge has to make sure that he or she conducts the hearing itself pursuant to the principles of fundamental justice. Within the limited scope of the issues at an extradition hearing, the 1992 amendments to Canada’s Extradition Act empower the extradition judge to grant Charter remedies if there is a breach thereof, including a stay of the proceedings.

Section 7 applies whenever a judicial official faces an issue of liberty and security interests. While not a trial on the merits, a committal hearing has to comply with the principles of procedural fairness that control all Canadian judicial proceedings. Where a fugitive claims that the Requesting State will not give him or her a fair trial, the Minister must consider and resolve this claim. The extradition judge, however, must take into account any conduct by the Requesting State or by its representatives, agents or officials that intrudes or tries to intrude into the conduct of Canadian judicial proceedings.

The common law doctrine of abuse of process also shields litigants by recognizing an inherent judicial discretion to prevent unfair or abusive proceedings. Both U.S. statements amounted to an effort to affect Canadian judicial proceedings by unduly pressuring the appellants to stop resisting extradition. It is immaterial whether the attempts did or did not work. That the Minister might later have been able to remedy the situation does not take away the courts’ power or duty to maintain the integrity of their own process.

“By placing undue pressure on Canadian citizens to forego due legal process in Canada, the foreign State has disentitled itself from pursuing its recourse before the courts and attempting to show why extradition should legally proceed. The intimidation bore directly upon the very proceedings before the extradition judge, thus engaging the appellants' right to fundamental justice at common law, under the doctrine of abuse of process, and as also reflected in s. 7 of the Charter. The extradition judge did not need to await a ministerial decision in the circumstances, as the breach of the principles of fundamental justice was directly and inextricably tied to the committal hearing.” [42]

Citation: United States v. Cobb, 2001 S.C.C. 19 (Sup. Ct. Can. April 5).

JURISDICTION (PERSONAL)

In class action by Burmese residents for violation of human rights, Ninth Circuit affirms ruling of California district court that granted French energy company’s motion to dismiss for lack of personal jurisdiction

Plaintiffs, farmers from the Tenasserim region of Burma, brought a class action suit against the following defendants: Unocal Corporation, individuals John Imle and Roger C. Beach (President and CEO of Unocal) and Total S.A., a French corporation. Plaintiffs alleged that the defendants were joint venturers along with Myanmar Oil and gas Enterprise (MOGE), a state owned enterprise allegedly controlled by the Burmese military Junta State Law and Order Restoration Council (SLORC). According to plaintiffs the defendants were building offshore drilling stations and seeking to transport natural gas through the Yadana gas pipeline and into Thailand.

In order to do this, plaintiffs alleged that the defendants engaged in force and intimidation to relocate entire villages in addition to forcing local farmers to work on the pipeline and pipeline related infrastructure. They also claimed the commission of crimes against humanity, torture, violence against women, arbitrary arrest and detention, cruel, inhuman, or degrading treatment, and an analogous list of intentional torts.

Plaintiffs sought declaratory and injunctive relief based on the above-mentioned human rights violations. The district court dismissed Total, S.A. from the case for lack of personal jurisdiction and plaintiffs took an appeal.

The U.S. Court of Appeals for the Ninth Circuit affirms. The Court first points out that it is the Plaintiff’s burden to establish the Court’s jurisdiction over a case. The Court noted that “...the district Court must first determine that a ‘rule or statute potentially confers jurisdiction over the defendant and then conclude that asserting jurisdiction does not offend the principles of Fifth Amendment due process.”

The Court noted that there was no basis for jurisdiction over defendant Total S.A., a French company. The Court acknowledged that the case presented interesting questions regarding whether the Court must apply the forum state’s long-arm statute as well as alter ego and agency doctrines in order to impute the contacts of subsidiaries to a foreign company.

According to California’s Long-Arm statute, a plaintiff can satisfy Constitutional due process requirements when it shows that a corporation has minimum contacts with the state forum and when litigation of a suit against the corporation would not offend traditional concepts of fair play and substantial justice. The law recognizes both general or specific jurisdiction over a defendant.

“If the defendant’s activities in the forum are substantial; continuous and systematic, general jurisdiction is available¼[a] Court may exercise specific jurisdiction over a foreign defendant if his or her less substantial contacts with the forum give rise to the cause of action before the Court.” [para. 14] Specific jurisdiction over a non-resident defendant may exist when (1) a non-resident consummates transactions within the forum state thereby purposefully availing himself of the forum state’s protection and laws; (2) the claim arises from the defendant’s forum related activities; and (3) the exercise of jurisdiction is reasonable.

With regard to purposeful availment, the Court reasons that a California company’s contracts with an out of state party do not alone automatically confer personal jurisdiction. In this case, therefore, “Total’s contractual relationship with Unocal [the second defendant] do [sic] not constitute purposeful availment of the benefits and protections of California Law.” [para. 24]

As to the second prong of the test, the Court applied a “but for” test holding that “[p]laintiffs present[ed] no evidence¼suggesting that the pipeline project would not have gone forward without Total’s dealings with Unocal.” [para. 26] The Court determined that a failure to establish jurisdiction pursuant to the first two prongs of the test relieves the Court of having to decide the third prong.

Finally, the Court ruled that the “existence of a relationship as between a parent company and its subsidiaries is not sufficient to establish personal jurisdiction over the parent on the basis of the subsidiaries’ minimum contacts with the forum. It is entirely appropriate for the directors of a parent corporation to serve as directors of its subsidiary, and that fact alone may not serve to expose the parent corporation to liability for its subsidiary’s acts.” [para. 31]

Citation: Doe v. Unocal Corp., No. 99-55576 (9th Cir. April 27, 2001).

SECURITY FOR COSTS

In action against Kuwaiti bank, English Court of Appeal (Civil Division) notes complexity of enforcing English judgments in United States compared to EU Member States as it determines fair security-for-costs figure imposable on Wisconsin plaintiff under European Convention on Human Rights now directly applicable in England

In 1993, Amy Nasser (plaintiff), formerly of the U.K. but now a U.S. citizen living in Wisconsin, claimed that someone had stolen jewelry and other objects of hers worth about 900,000 pounds from her safety deposit box at the United Bank of Kuwait (UBK). She filed suit against UBK in the English courts. A long and complex series of motions, correspondence and phone calls began in February 1994 over an order that she deposit 10,000 pounds (at some point as high as 25,000) as security for defendant’s costs.

Various judges at first instance expressed concern as to whether plaintiff could or could not afford the security and whether various amounts imposed would or would not stifle the litigation of a meritorious claim. After many ups and downs including dismissals and reinstatements, the lower court dismissed plaintiff’s case for want of prosecution when plaintiff failed to deposit 17,500 with the Court by a specified date.

When plaintiff took an appeal, the Court of Appeal (Civil Division) in October 2000 itself faced an additional security-for-costs question as to appellate costs. After detailing the intricate proceedings below, the Court of Appeal reaches the merits of a question of general interest. That issue is what should the appellate court’s approach be to “applications for security for the costs of an appeal under the Civil Procedure Rules (CPR), bearing in mind the restriction since 2nd May 2000 of the jurisdiction to make such orders, effected by CPR Part 25.15, read with Part 25.13(2)(a) and articles 6(1) and 14 of the European Convention on Human Rights as incorporated into English law since 2nd October 2000 by the Human Rights Act 1998.” [para. 1]

A key provision of the CPR is Section 15.13(1). It authorizes a court to order security for costs if it is just under all the circumstances of each case and if one or more of the conditions set forth in subparagraph (2) applies.

Section 25.13(2) provides: “The conditions are ‑ (a) the claimant is an individual ‑ (I) who is ordinarily resident out of the jurisdiction; and (ii) is not a person against whom a claim can be enforced under the Brussels Conventions or the Lugano Convention, as defined by section 1(1) of the Civil Jurisdiction and Judgments Act 1982.”

[Editorial Note: The Brussels Convention applies in the 15 EU Member States, while the Lugano Convention has entered into force in the EFTA countries of Iceland, Norway and Switzerland. As of May 20,1999, Poland has also adopted Lugano as part of its internal law.]

The Court of Appeal also notes that Article 6(1) of the European Convention on Human Rights provides that “ [i]n the determination of his civil rights and obligations ., everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.” By virtue of the Human Rights Act 1998 in effect since October 2, 2000, English courts are obliged to comply with the Convention and to take into account the decisions of the European Court of Human Rights (ECHR) which interpret its provisions. While allowing for a certain margin of appreciation, the ECHR has held that Member States that do provide for a right of appeal, must accord that right fairly and without discrimination.

Generally speaking, foreign residence is an important ground for ordering security for costs. “The rationale of the discretion to order security on that ground is that enforcement of an order for security for costs abroad may be more difficult or costly than elsewhere. (Cit.) The single legal market of the Brussels and Lugano Conventions means that abroad in this context now means not merely outside England or the United Kingdom, but outside the jurisdictions of the states party to those Conventions. It is however important that Part 25.15(1) and Part 25.13(1) involve a discretion.” [para. 46]

Next, the Court notes the important issue of whether the above-quoted provisions of the CPR raise issues of discrimination. Bearing on this point is Convention, Article 14. It provides that: “[t]he enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

Here, the parties generally agree that, under ECHR precedents, Article 14 focuses on the enjoyment of the conferred rights. Thus, the U.K. has to exercise its discretion on the instant issue without discrimination under Article 14 if security is within the ambit of the right to a fair hearing demanded by Article 6.

An applicant has to show that the domestic court has treated him or her less favorably that other persons who are in relevantly similar or analogous circumstances. There may be objectively justified grounds for differential treatment which pursues a legitimate aim. The conduct must also be a proportionate means of achieving the proper aim. “Proportionality under the Convention involves striking a fair balance between the protection of the interest of the community and a respect for the rights and freedoms safeguarded by the Convention. Finally, Contracting states enjoy a margin of appreciation (i.e. a discretion) in relation to the question of justification, which depends on all the circumstances, subject matter and background of the case.” [para. 48]

In the Court’s view, the relevant class here constitutes all foreign parties before English courts and security is to reduce the difficulties in collecting costs if a foreign party loses. “Merely because a person is not resident in England or another Brussels or Lugano state [however] does not necessarily mean that enforcement will be more difficult. The modern European equivalent of the Queen's writ may not run. But the entire rest of the world cannot be regarded as beyond the legal pale.”

“For example, the United Kingdom has reciprocal arrangements for recognition and enforcement with many Commonwealth and common law countries which have introduced legislation equivalent to Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 (or Part II of the Administration of Justice Act 1920), and which have highly sophisticated and respected legal systems. Many other countries have well‑established procedures for recognising English judgments.” [para. 59]

Moreover, the mere absence of reciprocal treaty arrangements with a third country does not make an English judgment unenforceable there. “It is a remarkable fact that no country has ever entered into any treaty providing for recognition and enforcement of judgments with the United States of America. But the reason is concern about the breadth of American jurisdiction, the corollary of which has been a willingness on the United States part to recognise and enforce foreign judgments by action on a similarly liberal and flexible basis. (Cit.) I am not aware that anyone has ever suggested that access to justice or to the means of executing justice is an American problem. Certainly no evidence has been put before us to suggest that the defendants would, or even could, face any real obstacle or difficulty of legal principle in enforcing in the United States any English judgment for costs against this claimant.” [para. 65]

Nevertheless, defendants would have to submit in the U.S. to an enforcement procedure considerably more complex than in a Brussels/Lugano state and against a determined adversary. Any security order must take these risks of delay and expense into account.

In this case, plaintiff seems to have some merit in her claim but she has never had a trial of the facts nor any appellate review of whether she should have such a trial nor even a hearing on the security for costs matter. She does not appear to absolutely without funds or the ability to raise at least modest amounts by borrowing. If she has any assets, however, they would be in the U.S.

Limited only to the amount of security proper as to the costs of appealing against the lower court’s order striking out plaintiff’s claim, the Court concludes that a fair figure would be 5,000 to be deposited at a time the Court will set in consultation with counsel. “We have not been concerned on this application with what might be the position in any respect with regard to the trial that would take place if that appeal succeeds.” [para. 76]

Citation: Nasser v. United Bank of Kuwait, 2001 WL 272998 (CA), [2001] EWCA Civ 556 (Ct. App., Civ. Div. April 11) (Smith Bernal Transcript).

TRADE

Mexico publishes operating rules for its program of distribution centers in U.S., called “Mexican-U.S. Commercialization System” and designed to expand trade with U.S. by small and medium-sized Mexican companies

Effective March 15, 2001, the Mexican Government published the rules of operation for its Distribution Center Program in the United States, called “Agreement that announces the rules of operation and evaluation and management factors for the program of distribution centers in the United States.”

The purpose of this Mexican program is the promotion of exports to the U.S. Approximately 90% of all Mexican companies are small and medium size companies, and their share in the export market is less than 2%. The large number of Mexicans living and working in the U.S., as well as the favorable trading environment provided by NAFTA, offer an opportunity for Mexico to expand its exports to the U.S.

Therefore, the Mexican Government, along with the Ministry of Economy and the Representative Office for Mexicans Abroad and Mexican-Americans, has developed a this new strategy. The main purpose is to channel the resources of small and medium enterprises to promote and distribute their products in the U.S. (Article 2). In particular, the Program will provide infrastructure such as training, warehouse space, and advice about potential markets covered by a Distribution Center. (Article 4). To take part, companies must meet certain criteria. For example they must have not more than 100 employees if they are in the service sector, or 500 employees if they are in the manufacturing sector (Articles 9 and 10).

To administer the program, the Government is setting up an Advisory Council (Consejo Consultivo) (Articles 23, 24 and 25), and a Technical Committee (Comite Tecnico) (Articles 26 and 27). The Program will establish entities (instituciones) in the form of Mexican non-profit organizations to furnish the export assistance. (Articles 28-32). These entities, in turn, will cooperate with non-profit “distribution centers” to be established in the U.S. (Articles 33-35).

Finally, a Directorate will govern the Program (Direccion). It is to be independent of the Government but will cooperates closely with the Directorate General for Promotion “D” within the Ministry of Economy (Articles 36-38).

Citation: Acuerdo por el que se dan conocer las reglas de operacion e indicadores de evaluacion y de gestion del programa de centros de distribucion en Estados Unidos, [Mexican] Diario Oficial de la Federacion, 15 March 2001.

TRADE

World Trade Organization Appellate Body affirms that U.S. restrictions on lamb meat from Australia and New Zealand violate WTO trading rules

On May 1, 2001, the World Trade Organization (WTO) Dispute Settlement Body released the Appellate Body report in the dispute regarding U.S. import barriers to lamb meat from Australia and New Zealand. The dispute revolves around a safeguard investigation begun by the U.S. International Trade Commission (USITC) on October 7, 1998 as to imports of lamb meat.

The U.S. imposed a definitive safeguard measure in the form of a tariff-rate quota on July 7, 1999. Australia and New Zealand filed a complaint with the WTO, alleging that the U.S. safeguard measures are inconsistent with Articles I, II, and XIX of GATT 1994 and the Agreement on Safeguards.

In a Report circulated on December 21, 2000, a Dispute Settlement Panel found that the U.S. safeguard measure did in fact violate trading rules. For example, the U.S. had failed to demonstrate the existence of “unforeseen developments” (see Article XIX:1(a) of GATT 1994), and had broadly defined its “domestic industry” as including growers and feeders of live lambs (see 4.1(c) of the Agreement on Safeguards).

The Appellate Body Report essentially upholds the Panel’s findings. In addition, the Appellate Body:

(1) Upholds the Panel’s finding that the USITC used data that was not sufficiently representative of the U.S. “domestic industry”;

(2) Finds that the Panel correctly interpreted the standard of review as set forth in Article 11 of the Dispute Settlement Understanding, which is appropriate to the review of claims under Article 4.2 of the Agreement on Safeguards.

(3) Concludes that the U.S. acted inconsistently with Articles 2.1 and 4.2(a) of the Agreement on Safeguards because the USITC Report did not explain adequately the determination that there existed a threat of serious injury to the domestic industry;

(4) Reverses the Panel’s interpretation of the causation requirement in the Agreement on Safeguards but upholds the ultimate finding that the U.S. acted incompatibly with Articles 2.1 and 4.2(b) of the Agreement because the USITC’s determination that there existed a causal link between increased imports and a threat of serious injury did not positively exclude other factors that may have hurt domestic industry.

The Appellate Body therefore recommends that the U.S. bring its safeguard measure in compliance with its obligations under GATT 1994 and the Agreement on Safeguards.

Citation: United States - Safeguard measures on imports of fresh, chilled or frozen lamb meat from New Zealand and Australia (WT/DS177/AB/R & WT/DS178/AB/R) (1 May 2001). The Appellate Body report is available on the WTO website “www.wto.org”.

TRANSPORTATION

As matter of first impression, Second Circuit affirms judgment against FedEx in suit brought by Japanese Company and decides issue of first impression whether Warsaw Convention provisions have been abated or extinguished following  entry into force of Hague Protocol

Fujitsu Limited, a Japanese corporation, shipped a container of silicon wafers from Narita, Japan to Ross Technologies, Inc. in Austin, Texas using Federal Express (FedEx). Ross rejected the goods in Austin and FedEx shipped them back via Memphis. FedEx did not prepare a new airway bill for the trip from Austin to Memphis and used an incomplete bill for the return to Japan. When it got the wafers back, Fujitsu noted that an oily substance covered the goods. Fujitsu reported the damage to FedEx who admitted that the damage occurred while goods were in their possession.

Plaintiff sued FedEx in federal district court, based upon breach of contract and negligence. FedEx contended that, under the Convention for the Unification of Certain Rules relating to International Transportation by Air (October 12, 1929, 49 Stat. 3000 (1934), 137 L.N.T.S. 11, reprinted in note following 49 U.S.C.S. Section 40105) (Warsaw Convention) governing international cargo shipments, it carried the cargo with a proper air waybill and was thus entitled to limitation on its liability to $9.07 per pound, or a total of approximately $1,200 for the entire shipment.

The lower court gave partial summary judgment to Fujitsu, finding that the bill did not comply with the requirements of the Convention and that the initial air waybill could not cover the shipment from Austin to Japan. The court found FedEx liable to Fujitsu for $726,640.

FedEx appealed complaining of a judicial misinterpretation of liability issues under the Convention. The U.S. Court of Appeals for the Second Circuit affirms. FedEx argued that it is not the Original Warsaw Convention, but rather the Warsaw Convention as modified by the international agreement referred to as the “Hague Protocol” that governs in this case. The latter would allow for limited liability protections for the defendant.

The issue of first impression is whether common law, the general savings statute, or customary international law governs whether a later treaty such as the Hague Protocol abates or extinguishes provisions of a prior treaty such as the Convention. Japan ratified the Hague Protocol in 1967, however it did not enter into force for the United States until March 4, 1999. The Warsaw Convention, as amended by the Hague Protocol, Article 9 “deprives carriers of the Convention’s limited liability protections only if  ‘cargo is loaded on board the aircraft without an air waybill having been made out’ or if ‘the air waybill does not include notice required by Article 8 which requires the carrier to give the consignor notice to the effect that, if the carriage involves an ultimate destination or stop in a country other than the country of departure, the Warsaw Convention may be applicable is matters concerning limited liability.”

In particular, the question here is whether by applying The Hague Protocol to the facts of this case where the shipment took place almost two years before the agreement’s entry into force for the United States would abrogate inconsistent provisions of the original Warsaw Convention.

The Court determines that “the issue of whether the provisions of a treaty have been abated or extinguished following the entry into force of a subsequent treaty is governed by neither the common law doctrine of abatement nor the general savings statute. Rather [w]e apply the rules of customary international law enunciated in the Vienna Convention of the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331.”

On this matter, the Court used the Vienna Convention’s distinct rules concerning amendment, modification, suspension, and termination of international agreements. Customary international law contains no baseline presumption that the provisions of a new agreement automatically abate and extinguish any prior treaty relating to the same subject matter. To the contrary, international customary law “furnished almost the opposite baseline norm, pacta sunt servanda, which provides that a treaty in force is “binding upon the parties to it and must be performed by them in good faith” unless the treaty has been affirmatively terminated or suspended.”[Slip op. 25]. See Vienna Convention Art. 26.

Many multilateral treaties such as the Warsaw Convention exist and they are frequently modified – but not thereby terminated – by amending agreements binding only those parties that are willing to accept the amendment while leaving the original or earlier provisions still in force to govern the relations between other parties, as well as between the other parties and the amending group. Therefore, it is common for several versions of a multilateral treaty to exist at the same time, with different sets of provisions operating between different groups of states.

Therefore the Court concludes that “while the Hague Protocol and Original Warsaw Convention clearly relate in subject matter, it is equally clear that the Original Warsaw Convention was not terminated by enactment of the Hague Protocol.” [Slip op. 27]. Since the United States was not a party to the Hague Protocol at the time of the shipment, the Court does not have to consider whether Fed Ex would be able to invoke the liability limitation under the terms of the Amended Warsaw Convention. The Original Warsaw Convention is applicable in this case regardless of the entry into effect of the Hague Protocol during the pendency of the case.

Citation: Fujitsu Limited v. Federal Express Corp., No. 00-7343, 2001 U.S. App. LEXIS 7356 (2nd Cir. April 20, 2001).

USTR issues reports on trade rules enforcement. On April 30, 2001, the U.S. Trade Representative issued three reports on trade: (1) The “Super 301" report on trade expansion, (2) the “Special 301" report on the protection of intellectual property abroad, and (3) the “Title VII” report on foreign government procurement practices. The Super 301 Report highlights recent U.S. success in enforcing trading rules, such as the successful resolution of the banana dispute with the EU under WTO dispute settlement procedures. It also outlines the foreign trade practices that the U.S. is monitoring such as the restrictive automobile policies in Japan and Korea, and the onerous technical regulations in Mexico. The Special 301 Report discusses intellectual property issues, such as Ukraine’s designation as a “Priority Foreign Country” for its failure to combat piracy of optical media, and enforcement of TRIPS obligations within the WTO. It also includes a “watch list” of countries with deficient intellectual property protection, which includes the EU, India, and Russia. The Title VII Report outlines initiatives to open up the markets for government procurement, such as the Free Trade Area of the Americas (FTAA) and the pending WTO agreement on Transparency in Government Procurement. Citation: U.S. Trade Representative press release 01-25 (April 30, 2001) (includes executive summary of the three reports).

EU publishes 2001 integrated tariff (TARIC). The Commission of the European Communities has published the 2001 Integrated Tariff of the European Communities (TARIC), which is the basic nomenclature for the Common Customs Tariff, trade statistics, and trade legislation. It contains approximately 10,000 headings with eight digits each that describe all products being traded, including metals, live animals, plastics, nuclear reactors, and aircraft. Citation: 2001 O.J. of the European Communities C 119 & C 119A), 23 April 2001.

U.S. imposes countervailing duties on EU low-enriched uranium. The U.S. Department of Commerce has imposed provisional countervailing duties on European low-enriched uranium (LEU), affecting two European suppliers, Urenco and Eurodif. The Department of Commerce had begun the investigation on December 27, 2000, upon a complaint of the United States Enrichment Company (USEC), and published its findings on May 8, 2001. According to the findings, Urenco received debt forgiveness and R&D support, causing a subsidy margin of 3.72%. Eurodif allegedly sold uranium to the French government-owned electricity company at unduly high prices, thereby receiving a subsidy resulting in a subsidy margin of 13.94%. Citation: European Union in the US News Release No. 34/01 (May 10, 2001).

EU imposes sanctions on Liberia. The Council of the European Union has issued Common Position 2001/357/CFSP to impose restrictive measures on Liberia, pursuant to United Nations Security Council Resolution 1343 (2001). The Common Position prohibits any sale of military equipment to Liberia, and any diamond trade with Liberia. These restrictions will be effective until May 8, 2002. Citation: 2001 O.J. of the European Communities (L 126) 1, 8 May 2001.

U.S. updates list of dual-use goods under Wassenaar Arrangement. The U.S. is a founding member of the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods, which aims to control strategic items that have both civil and military uses. In December 2000, the Wassenaar Arrangement made changes to its list of controlled Dual-Use Goods and Technologies. The U.S. Department of Commerce, Bureau of Export Administration, has revised the Commerce Control List to implement those changes [see 15 C.F.R. Part 774]. The main purpose of the changes is to account for technological advances. For example, it changes the composite theoretical performance (CTP) control parameter for certain microprocessors from 3,500 million theoretical operations per second (MTOPS) to 6,500 MTOPS. It also alters the control level for graphics accelerators and coprocessors from 3 M vectors/sec to 200 M vectors/sec. Citation: 66 Federal Register 18402 (April 9, 2001).