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 7 (July).

ANTI-SUIT INJUNCTIONS

English Court of Appeal upholds injunction against continuance of California breach of contract litigation since contract itself barred such suit and applicable English law warranted injunctive relief from contractually barred suits

Utrecht - America Finance Company is a Delaware corporation with its main place of business in New York. Indirectly, it is a wholly-owned subsidiary of a Dutch bank doing business as Rabobank Nederland (RN). National Westminister Bank PLC (NWB) and RN each agreed to furnish Yorkshire Food Group PLC (YFG) and certain of its subsidiaries a total of $100,000,000 as a credit facility. The YFG subsidiaries were either English or U.S. corporations.

In October 1997, NWB, Utrecht, RN, YFG and a Delaware subsidiary of YFG d.b.a Yorkshire Dried Fruit & Nuts, Inc. entered into a “take-out agreement” (TOA). The TOA brought about a novation under which Utrecht took out or bought NWB’s one-half interest in the credit agreement.

Two years later, RN and Utrecht sued NWB plus various individual directors and officers of certain YFG subsidiaries in a California court. Plaintiffs (or “Utrecht”) alleged fraudulent concealment of material information, negligent failure to disclose information and a breach of good faith or fair dealing in failing to disclose such information to Utrecht. NWB filed an answer and counterclaim on January 3, 2000 accompanied by a letter stating that it was doing so to avoid waiver or forfeiture under California procedural rules and without prejudice to its right to file suit in the English courts based on the same claims.

Fifteen days later, NWB began the present litigation in England. Three weeks after that, without seeking an interlocutory injunction, it applied for summary judgment seeking declaratory relief and an injunction barring plaintiffs from further proceeding in the California courts. On August 1, 2000, Utrecht applied for an order staying the English action until after completion of the California proceedings. The court of first instance declined to stay the proceedings and issued NWB the requested declaratory judgment and injunction. Upon Utrecht’s appeal, the Court of Appeal dismisses.

The TOA contained detailed provisions as to the substance of the agreement and as to the type of information to which each party was to be entitled. In addition, it provided that each party submits to the jurisdiction of the English courts over any dispute arising out of the TOA and the buyer appointed RN, London Branch, as its fully authorized agent to accept process issuing out of any English litigation over the TOA.

Under the TOA, each party waived any forum non conveniens objections to litigating in the English courts and agreed that a resulting English judgment may be enforced against it in the courts of any other jurisdiction. These provisions do not preclude any party from litigating TOA issues in any other court of competent jurisdiction or “concurrently in more than one jurisdiction.” Finally, the choice-of-law clause opted for the application of English law.

Utrecht’s main goal in its appeal is to have the injunction set aside so that it can complete the California litigation. The Court of Appeal first compares the two competing systems of law, then finds it logical to consider the lower court’s denial of the request for a stay of the present case.

Under English law, the TOA would not impose a duty on one party to disclose material facts to the other. Only reliance upon a misrepresentation by the other side would warrant damages or other relief. On the other hand, California law apparently does recognize a legal duty in the TOA type of contract for each side to disclose material facts.

As to the question of staying the present proceedings, the Court agrees that Utrecht properly did not try to make a case based on forum non conveniens in view of the TOA’s waiver provisions noted above. Nor, in light of the TOA’s terms, should the court below have exercised its concededly inherent power to manage the cases before it.

Analyzing the English case law, the Court concludes that this is not a suitable case for enjoining the continuance of the California proceedings, because they are generally vexatious or oppressive. Indeed, many factors link the dispute to that jurisdiction, and the TOA expressly allows a party to bring TOA proceedings in any court.

“However, for the reasons I have given, the position is radically different once it is held that Utrecht are in breach of contract in pursuing their claim in California. It follows that the question whether the judge was right to hold that Utrecht were in breach of the TOA in that regard is crucial to the outcome of this appeal, and that the judge was entirely justified in embarking on NWB's summary judgment application.” [para. 38]

Paragraph 8.2(d) of the TOA provides that “the Seller may be in possession of material non‑public information relating to the Transfer Assets and which may affect the Purchase Price which the Seller shall be under no obligation to disclose to the Purchaser and the Purchaser hereby acknowledges and agrees that the Seller shall have no liability to the Purchaser, and the Purchaser shall bring no action against the Seller in relation to the non‑disclosure of such information, provided that nothing in this sub‑clause (d) shall affect the rights of the Purchaser in relation to the Seller Warranties.”

As an aid to finding out what the parties intended to embody in Clause 8.2(d), the Court sketches the context of the TOA. “The contract was negotiated at arm's length by two large banks, both of which were advised by skilled commercial lawyers. Each bank knew that the other might have information of the type described in the clause which would affect the price if it were disclosed. Yet each bank expressly agreed that there would be no duty on the part of either bank to disclose the information. It was thus agreed by each that the other could deliberately keep to itself information which it knew would assist it to negotiate the price or indeed to decide whether to enter into the contract at all.” [para. 49]

“The agreement is clear and unambiguous and protects both banks from liability for non‑disclosure, however much each might be liable for negligence or fraud under Californian law if there were a duty of disclosure. If there is no duty to disclose I do not see how either bank can be liable for breach of it, whatever its intentions and wherever the action is brought. Moreover each expressly agreed not to sue the other anywhere relying upon non‑disclosure of the information referred to in clause 8.1(c) and 8.2(d). Yet, ...Utrecht has sued NWB in America alleging just such non‑disclosure.” [para. 52]

NWB further contended that clause 8.2(d) failed to meet the “reasonableness” test of Section 11(1) of the Unfair Contract Terms Act of 1977. It provides that: “In relation to a contract term, the requirement of reasonableness is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably have been, known to or in the contemplation of the parties when the contract was made.”

The Court of Appeal, however, is not persuaded. “There was nothing unreasonable about either clause 8.1(c) or clause 8.2(d), freely negotiated as they were between banks of this kind. It should be noted that the clauses do not purport to exclude liability for negligent or fraudulent misrepresentation or, indeed, any notion of fraud as it is known to English law.” [para. 59]

Finally, the Court sees no abuse of discretion in permanently enjoining Utrecht from continuing the California suit. “The grant of an injunction is of course an equitable remedy and the court thus had a discretion whether or not to grant it. However, the conclusions that Utrecht is in breach of contract in bringing the proceedings in California and that it would be in continued breach of contract if it were to continue with them make such proceedings vexatious and oppressive. There is a plain risk that, unless restrained, Utrecht will continue with them. The grant of an injunction in these circumstances does not offend the principles of comity in any way.” [paras. 73-74]

Citation: National Westminster Bank Plc v Utrecht‑America Finance Co., Court of Appeal (Civil Division), May 10, 2001 (Smith Bernal Transcript).

AVIATION

Ninth Circuit finds that state-owned Italian airplane manufacturer could not be held liable for deaths of two airplane passengers under General Aviation Revitalization Act of 1994 because 23 years had elapsed since delivery of airplane, but rules that jurisdiction does exist under FSIA

On November 26, 1993, an airplane designed by Marchetti (a company owned by the Italian Government) crashed in California. Marchetti had sold the aircraft in 1970 to SA Sabena N.V. in Belgium, which later sold it to U.S. owners. The representatives of two victims of an aircraft crash sued the manufacturer, alleging that the defendant had failed to warn that a problematic mechanical component had to be replaced. The district court dismissed the action for failure to state a claim on grounds that a statute enacted after the crash barred the action. The U.S. Court of Appeals for the Ninth Circuit affirms.

First, the Court agrees that the General Aviation Revitalization Act of 1994 (hereinafter GARA) [Pub.L. 103-298, 108 Stat. 1552 (1994)] precludes the suit. Defendants first delivered the aircraft in question about 23 years before the accident. GARA’s 18-year period of limitation began on the date of the first transfer from the manufacturer. Although Congress enacted GARA after the accident in question, it became effective prior to plaintiffs’ filing this action. GARA constitutionally applied retroactively to bar this action because Congress had made a conscious decision that GARA should limit the liability of aircraft manufacturers.

“It is apparent that Congress was deeply concerned about the enormous product liability costs that our tort system had imposed upon manufacturers of general aviation aircraft. It believed that manufacturers were being driven to the wall because, among other things, of the long tail of liability attached to those aircraft, which could be used decades after they were first manufactured and sold. (Cit.) Congress therefore enacted GARA...” [The limitation period of 18 years begins to run on] “A) [the] date of delivery of the aircraft to its first purchaser or lessee, if delivered directly from the manufacturer; or B) the date of first delivery of the aircraft to a person engaged in the business of selling or leasing such aircraft.” [Slip op. 11-12].

The plaintiffs argued that it would be unconstitutional for the Court to apply the statute retroactively. The Court holds, however, that the Supreme Court has recognized certain instances where legislation may operate this way. After closely reading the text and investigating the legislative intent, the Court concludes that Congress clearly did intend the law to apply to all actions, even those that arose prior to the effective date.

Plaintiffs also maintained that such an application of the statute violated their vested property rights in the cause of action. The Court dismisses this argument, holding that a cause of action is a species of property, and that a party’s property right in any cause of action does not vest until the party obtains a final unreviewable judgment.

Furthermore, “Congress decided that the economic health of the general aviation aircraft manufacturing industry depended on lifting the requirement that manufacturers abide the possibility of litigation for the indefinite future when they sell an airplane. It, therefore generally limited their exposure to accidents which occur within 18 years of the first delivery of the airplane... Marchetti first delivered the F-260 in question here about 23 years before the crash in California. We hold that, in GARA, Congress constitutionally barred an action based upon that accident, even though GARA itself was not passed until after that accident occurred.” [Slip op. 27]

Second, the Court agrees that, given that the defendant was an instrumentality of the Republic of Italy, it must determine jurisdiction under the Foreign Sovereign Immunities Act of 1976 [FSIA] (28 U.S.C.S. Section 1604]. Under the third type of “commercial activity exception” in Section 1605, a federal court has jurisdiction over a foreign sovereign defendant if the suit involves defendant’s activity “in connection with a commercial activity¼outside the territory of the United States...causing a direct effect in the United States.” [Slip op. 5].

The defendants argued that a delay of 23 years from the date of initial sale negates the causation part of the test. The Court recognizes that considerable time has passed, but also holds that “time, itself is linear, and while questions about its ravages, or speculation about the ravages of others along the way, may affect proof, they do not affect jurisdiction.” [Slip op. 10-11].

Citation: Lyon v. Agusta, S.P.A., 252 F.3d 1078 (9th Cir. 2001).

BANKRUPTCY

Tenth Circuit affirms summary judgment for defendant where Japanese trustee sued to set aside transfer of golf course in U.S. as invalid under Japanese bankruptcy law

Plaintiff-appellant is the trustee in a Japanese bankruptcy proceeding concerning Grandote Country Club Ltd. Plaintiff seeks to gain title to a golf course in Colorado by invalidating the transfer of ownership, arguing that it was fraudulent and that a later tax sale was invalid under the Colorado Uniform Fraudulent Transfer Act (hereinafter CUFTA) [Colo. Rev. Stat § 38-8-101 to 38-8-112]. The district court granted summary judgment, and the U.S. Court of Appeals for the Tenth Circuit affirms.

The trustee first argued that Japanese law should govern the case. The Court disagrees, holding that because the dispute involves real property, application of local law is appropriate. “Moreover, both federal and state choice of law principles favor application of the ‘law of the jurisdiction having the greatest interest in the litigation’... Without question, Colorado has the greatest interest in the litigation: the property is located in Colorado, the tax sale was conducted for failure to pay Colorado taxes, most of the agreements related to the property were executed in Colorado, and there has been extensive litigation in Colorado courts to determine the owner of the property.” [Slip op. 9-10]

A second contention was that the issuance of title violated CUFTA. The Court holds that “[a] a transfer is not fraudulent under CUFTA where an asset is acquired for a ‘reasonably equivalent value’ through a ‘regularly conducted, non-collusive sale, foreclosing on assets subject to a lien.’” Colo. Rev. Stat. § 38-8-104(2). The Court summarily rejects the idea that the transfer was not for “reasonably equivalent value” under CUFTA.

Plaintiff thirdly urged that the Japan-to-Colorado transfer was fraudulent because Noriyuki Hoshi was the only person authorized to convey and he did not do so. Defendant submitted an affidavit averring that Hoshi was, in fact, the signatory on the documents. The Court concludes that because plaintiff presented no admissible evidence to support his allegations of fraud, there was no genuine issue of material fact. As the complaint only contains hearsay allegations, the Court rules that the plaintiff failed to support his allegations by proffering evidence admissible under the Federal Rules of Evidence as required by Civil Rule 56.

Citation: In re Grandote Country Club Co., Ltd., 252 F.3d 1146 (10th Cir. 2001).

COMMUNICATIONS

Citing ambiguity in English and French versions of Canadian penal statute, Ontario Court of Appeal approves quashing of search warrants leading to charges against defendants for marketing devices that enabled Canadian citizens to decode direct-to-home satellite television programs from United States

The only shareholder and officer of Tech Electronics and Electronics Plus is Dawn Branton, a Lindsay, Ontario businesswoman. Her businesses sell television satellite systems able to pick up programming signals directly from a satellite transmitter and other electronic goods. This direct-to-home (DTH) satellite reception entails a small satellite dish and a decoder box. Canadian owners regularly use the DTH systems to enjoy a wide range of televised programming signals, most of which come from the United States.

The Canadian Radio and Television Commission (CRT) licenses two providers in Canada to market DTH encrypted satellite programming signals. Subscribers buy the satellite dish, a receiving box, and a decoding card to access the signals. The DTH providers activate the access card for a monthly or annual fee. DTH providers in the U.S. sell the same type of systems, using access cards limited to subscribers who have U.S. addresses. U.S. providers do not have Canadian licenses to market their signals to individuals or businesses in Canada.

Thus, Canadian subscribers who wish access to U.S. DTH signals must somehow come up with a U.S. address. Ms. Branton and her companies (and other Canadian merchants) openly sold DTH systems with cards able to decode U.S. signals. They also enabled their Canadian buyers to receive the U.S. DTH services by setting up an address in the U.S. to which Canadian subscribers could sent the monthly payments.

On November 8, 1999, the Royal Canadian Mounted Police (RCMP) got three search warrants authorized by a judicial officer. The next day, the RCMP executed them at the two business premises of Tech Electronics and at one of Electronics Plus. They seized 320 complete satellites systems, 286 receivers and 96 satellite dishes along with documents, files, computers and other matters unrelated to the nature of the charges.

On November 12, the authorities charged defendants with violating Sections 9 and 10(1)(b) of the Radio communication Act of 1985 (RCA). Section 9(1) provides that no person shall, “decode an encrypted subscription programming signal or encrypted network feed otherwise than under and in accordance with an authorization from the lawful distributor of the signal or feed.” Section 10(1)(b) punishes individual violators of Section 9 with a maximum fine of $5,000 and/or a term of imprisonment for not more than one year. Corporate law breakers are liable to a fine not to exceed $25,000.

In response to defendants’ motion to quash the warrants and return the seized property, the motions judge found the search warrants invalid as failing to make full, fair and frank disclosure that Canadian law intended to criminalize listening to foreign DTH signals not licensed by Canadian authorities. He also ruled that the search warrant failed to state an offense known to the law. The government appealed. The Ontario Court of Appeal, however, dismisses the appeal.

On the question of statutory construction, the Court notes the well settled rule of Canadian law on the reading of statutes that impose imprisonment and fines. In cases of ambiguity, the courts must read the statute narrowly. “The [government’s] interpretation of the section would include conduct not clearly prohibited by the language of the section, and would extend the ambit of the offence to decoding foreign encrypted subscription program signals originating outside Canada. Language clearly creating such an offence is not used in the statute. The scope of the offence created should not be enlarged by implication or by reading in. ... The weight of [Canadian] authority supports the ... interpretation of s. 9 of the RCA, that it is not an offence in Canada to subscribe to foreign satellite programming.” [Slip op. 12-13]

One rationale for strictly reading an ambiguous criminal statute is to ensure that the public should receive fair notice of what conduct the legislature demands that it avoid. “The second justification underlying the principle arises out of our commitment to individual liberty, particularly where the criminal law power is engaged. Canadian society operates on the basis that individuals are free to do as they choose, subject to constitutionally permissible limits on that liberty imposed by Parliament (and not the Courts). Where it is unclear whether Parliament has chosen to prohibit conduct by making it criminal, the commitment to individual liberty commands that the doubt be resolved in favour of the maintenance of individual liberty.” [Slip op. 19]

The Court also analyzes the French text of the RCA. “The wording of the French version of the legislation suggests that the prohibition is not absolute and does not apply to foreign distributors. The justification for the principle that ambiguity in criminal legislation is to be resolved by choosing the interpretation most favourable to the accused applies to this case. As a result, I would hold that the motions judge was correct in determining that the offence in this case was not one known to law.” [Slip op. 29].

Citation: Her Majesty the Queen v. Branton, 2001 Ont. C.A. Lexis 198 (Ont. Ct. App. April 20).

COPYRIGHT

EU issues directive to have Member States harmonize their copyright law for information technology

With Directive 2001/29/EC “on the harmonization of certain aspects of copyright and related rights in the information society,” the European Union is harmonizing its rules for copyright. The Preamble notes that this Directive implements several of the new international obligations arising from the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty (Preamble (15)). The Directive is related to the new Directive on electronic commerce (2000 O.J. (L 178) 1, 17 July 2000), and should be implemented within the same time frame (Preamble (16)). The new Directive specifies certain aspects of copyright, especially as it applies to information technology (Article 1).

Expressly excluded from the scope of the new Directive are existing EU protections for computer programs and databases, for broadcasting programs, usage rights in intellectual property, and the term of copyright protection (Article 1). The Directive orders the EU Member States to provide authors, performers, and producers the exclusive right to authorize and prohibit the reproduction of their work, and the right to distribute their work as they deem fit (Articles 2-4). On the other hand, if a party is using such works for teaching, for the benefit of handicapped people, for reviews and critique, as well as for incidental use in other works, the directive does not apply (Article 5).

The Directive gives Member States until December 22, 2002 to transpose its provisions into domestic law. The Directive will apply to all works and other subject-matter that EU Member States legislation protects as of that date.

Citation: Directive 2001/29/EC ... of 22 May 2001 on harmonization of certain aspects of copyright and related rights in information society, 2001 O.J. of European Communities (L 167) 10, 22 June 2001.

FORUM NON CONVENIENS

Eleventh Circuit affirms dismissal on forum non conveniens grounds of a thirty-six lawsuits brought against American air cargo carrier after crash in Ecuador

An air cargo aircraft crashed shortly after take off from Manta, Ecuador, into a neighboring town, killing 30 Ecuadorian residents on the ground. As a result of the fatal crash, more than 700 individuals brought about 100 lawsuits against the owner, Million Air, Inc., a U.S. company. In 1997, 36 of these cases were consolidated in the Southern District of Florida. In 1998, the court dismissed the consolidated cases on the basis of the forum non conveniens doctrine.

In December of 1998, the plaintiffs in the present case filed their complaint in the Southern District of Florida. Defendants later moved for dismissal based on the doctrine of forum non conveniens. Plaintiffs argued, in pertinent part, that the legal system in Ecuador was in turmoil and therefore could not provide an effective forum to decide the case. In addition, plaintiffs urged that a newly enacted Ecuadorian law (Law No. 55) precluded bringing the case in an Ecuadorian court, thereby rendering plaintiffs without legal recourse. The district court dismissed the case, and this appeal ensued. The U.S. Court of Appeals for the Eleventh Circuit affirms.

The district court had also addressed the plaintiffs contentions as to the effects of a law enacted by the Ecuadorian legislature soon after the plane crash. The Ecuadorian law (Law No. 55) stated in pertinent part that “[I]n case of International concurrent jurisdiction, the plaintiff can freely choose to demand, in Ecuador or in another country, with the sole exception of cases which, pursuant to an explicit provision of law, must be resolved by Ecuadorian Judges, like the divorce of an Ecuadorian citizen¼In the case that the demand is filed outside of Ecuador, the national competence and the jurisdiction of the Ecuadorian Judges on the case will be terminated forever.” [Slip op. 3]

In analyzing the lower court’s dismissal of the case at hand, the Court of Appeals requires the defendants to show that “1) there was an adequate alternative forum, 2) that the balance of private interests and public interests weighed in favor of dismissing the litigation to the alternative forum (with the public interests coming into play only where the private interests were at or near ‘equipoise’), and that there would be no inconvenience or prejudice to a plaintiff in filing in the foreign forum.” [Slip op. 7] In the Court’s view, the defendant has met each prong of the test.

First, regarding the availability and adequacy of the Ecuadorian Forum, the Court notes that “in the pending case, the dispute about, whether Law No. 55 precludes Ecuadorian courts from asserting jurisdiction over Plaintiff’s claims is a dispute about availability¼Law No. 55 provides that once a lawsuit is filed outside of Ecuador, ‘the national competence and jurisdiction of the Ecuadorian Judges on the case will be terminated forever.’” [Slip op. 13-18]

The district court held that previous Ecuadorian case law established that Law No. 55 did not, in fact, apply to litigation dismissed from a foreign court on the grounds of forum non conveniens. The Court of Appeals finds that the district court’s ruling was not erroneous in any manner, and that Ecuador is an available forum. Furthermore, Ecuadorian courts are sufficiently impartial and efficient to be considered a viable forum.

With regard to the second prong of the test, the Court holds that “... the District Judge did not exceed her discretion in finding the private factors to weigh in favor of dismissal... We also note that the Plaintiffs have not challenged Judge Nesbitt’s finding that the public interests strongly favored dismissal. As she observed, the Ecuadorian courts are already hearing Manta crash cases, and Ecuador has an interest in determining the extent of damages payable when planes crash in Ecuador on Ecuadorian citizens. Since the Plaintiffs have not met their burden of producing sufficient evidence that Ecuador is an inadequate forum, and since Defendants have shown that Ecuador is an available forum and that the public and private factors both weigh in favor of dismissal, Judge Nesbitt’s decision to dismiss was within her discretion.” [Slip op 24].

Citation: Leon v. Million Air Inc,.251 F.3d 1305 (11th Cir. 2001).

WORLD TRADE ORGANIZATION

WTO Panel finds that U.S. properly implemented previous Panel recommendations in dispute over application of Sea Turtle Conservation Act

Stemming from a 1996 Dispute Settlement Body finding that the United States had unjustly administered import restrictions on shrimp and shrimp products to the detriment of India, Malaysia, Pakistan, and Thailand, a World Trade Organization Panel heard a related complaint from Malaysia that the US has failed to comply with the requirements of the 1996 Panel recommendations.

The import restrictions in question required in 1996 that the US accept imported shrimp or shrimp products only from nations with the same shrimping policy as the United States, which required the use of Turtle Exclusion Devices (TEDs) to prevent the capture and injury of sea turtles during shrimping activity. Countries seeking certification by the US to export shrimp products to the US were given a “phase-in” period, during which they were allowed to continue exporting shrimp products to the US while they attempted to conform to the qualifications for certification.

The phase-in period granted to Caribbean and Western European states was longer than that granted to the South Asian and Indian Ocean states, and was thereby held to cause economic harm to the countries of India, Malaysia, Pakistan, and Thailand, and was also found to be discriminatory. The requirement that the policy adopted by countries seeking certification be the same as the policy adopted by the US was found to unjustly remove from national governments the right to choose the nation’s economic policy.

The U.S. has since modified its requirements, providing technological training and assistance concerning the installation and operation of TEDs to nations in the Indian Ocean and South Asia who seek certification to export shrimp products to the US. The US has further amended its requirements to allow for certification of countries with comparable shrimping policies to that of the U.S., rather than mandating certified countries to adopt the same shrimping policy as the U.S.

The Panel held that the U.S. has made a good faith effort to comply, and that Malaysia has never expressed or made known its interest or intent to be certified to export shrimp products to the U.S. Absent such interest or intent, Malaysia has not in any way been subjected to financial hardship due to the lack of a phase-in period. The decision went on to state that for as long as it can be determined that the US maintains such a good faith effort, it cannot be said that the shrimp-turtle policy is discriminatory, or that it is a disguised restriction on international trade.

Citation: United States—Import Prohibition of Certain Shrimp and Shrimp Products, Recourse  to  article  21.5  by  Malaysia (WT/DS58/RW) (15 June 2001). [Panel Report is available on WTO website “www.wto.org”; U.S. Trade Representative press release 01-40 (June 15, 2001).]

WORLD TRADE ORGANIZATION

WTO finds for U.S. in dispute with Mexico over implementation of prior adverse ruling in Mexican complaint about U.S. dumping of high fructose corn syrup

On June 22, 2001, the World Trade Organization (WTO) circulated the Panel report reviewing Mexico’s implementation of its previous report that found Mexican anti-dumping duties on U.S. products improper under the Antidumping Agreement (AD Agreement). In 1988, Mexico’s anti-dumping authority, SECOFI, had determined that imports of High Fructose Corn Syrup (HFCS) from the U.S. were being dumped in the Mexican market and threatened material injury to the Mexican sugar industry.

A WTO Dispute Settlement Panel reviewed the matter and sided with the U.S. in its Panel report of January 2000. On September 20, 2000, the Mexican anti-dumping authority issued a new determination that was supposed to comply with the Panel’s recommendations. In that new determination, the Mexican authority granted refunds of the provisional anti-dumping duties for a certain period but again concluded that HFCS imports threaten the Mexican sugar industry, and confirmed the anti-dumping duties. The U.S. then sought recourse under Article 21.5 of the Dispute Settlement Understanding (DSU).

In essence, the Panel found that Mexico failed to comply with the earlier Panel report where Mexico was found to have improperly determined that HFCS imports threatened Mexico’s sugar industry. The Panel concludes that Mexico’s imposition of definitive anti-dumping duties on HFCS imports from the U.S. on the basis of the SECOFI re-determination is inconsistent with Articles 3.1, 3.4, 3.7 and 3.7(i) of the AD Agreement because Mexico inadequately considered (a) the impact of dumped imports on the domestic sugar industry, and (b) the potential effect of the alleged restraint agreement between Mexican sugar refiners and soft drink bottlers to restrain soft drink bottlers’ use of HFCS in its determination of the likelihood of substantially increased importation. Consequently, Mexico has failed to implement the recommendations of the original Panel to bring its anti-dumping measure into conformity with the obligations under the AD Agreement. The Panel therefore again recommends that Mexico bring its measure into compliance with the AD Agreement.

Citation: Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States (WT/DS132/RW) (22 June 2001). [Panel Report is available on the WTO website “www.wto.org”; U.S. Trade Representative (U.S.T.R.) press release 01-44 (June 22, 2001); [submissions of U.S.T.R. are avail- able on the U.S.T.R. website “www.ustr.gov/enforcement/briefs”.]

French court approves Einhorn extradition to U.S. In 1980, eighteen months after her disappearance, the bludgeoned corpse of Holly Maddux turned up in a steamer trunk in the Philadelphia apartment she had been sharing with Ira Einhorn. Charged with her murder, Einhorn, a well-known counter-culture guru, jumped bail the following year and fled the country. A Pennsylvania state court convicted him in absentia of murdering Ms. Maddux and sentenced him to life imprisonment. In 1997, authorities finally traced Einhorn to a remote farm house in the Bordeaux region of France. The U.S. then requested his extradition. The lower French Courts ruled, however, that they could not allow the extradition of Einhorn unless Pennsylvania gave him a new trial and guaranteed that he would not suffer the death penalty. The case eventually got up to the Conseil d’Etat, the highest French court on the public law side. In 1998, the Pennsylvania legislature enacted a statute granting persons convicted in absentia the right to a new trial if they came back to the state and requested one. Under the law in effect at the time of the crime, moreover, Einhorn could only receive a life sentence if again convicted. As a result, the Conseil d’Etat upheld the decision of Lionel Jospin, the French Prime Minister, to extradite. At the last minute, Einhorn attempted to cut his own throat but changed his mind. Questions about the state of Einhorn’s health apparently led his attorneys to petition the European Court of Human Rights. After a preliminary inquiry, that Court decided to allow the extradition to proceed. He is now back in the United States. Einhorn has denied his guilt, attributing the charges to a conspiracy by the F.B.I. and the C.I.A. Citation: The New York Times, July 20, 2001, Late Edition, Section A, page 12, Col. 5, byline of Francis X. Clines.

Kazakhstan issues quotas and other rules for foreign workers. The Government of Kazakhstan has enacted new rules concerning Foreign Labor. The new rules apply to legal entities or individuals with whom an employee has a contract. The Government of Kazakhstan may now establish annual quotas according to the number of foreigner workers. Local executive bodies must show a need for foreign labor to the central executive body four months ahead of the upcoming year. All employers choosing to utilize foreign labor must obtain permits which must strictly conform to the annual quota. The Government may also control the number of employed aliens depending on the national and local labor markets, as well as on the alien’s expertise. Additionally, the rules devise three categories: (1) managerial staff with intent to organize, (2) specialist individuals with “higher or specialized secondary education, with certificates of individual entrepreneurs confirmed in a prescribed manner,” and (3) skilled workers. Employers must notify the immigration agency no later than 3 work days after job vacancies open up. Citation: Information provided by U.S. Department of Commerce, BISNIS, July 2001, “Recently Adopted Rules on Foreign Labor in Kazakhstan.”

U.S. lifts trade sanctions imposed on EU products because of banana dispute. The U.S. Trade Representative has issued a notice in the Federal Register, terminating the retaliatory duties on $191 million worth of European Union (EU) products which the U.S. had imposed because of the EU’s restrictive banana-import regulations. The WTO had previously found that the EU had been unduly restricting banana imports from Central and South America, causing $191.4 million in annual economic harm to U.S. companies. See 2000 International Law Update 191 As a result, the U.S. had imposed a 100% duty pursuant to Section 301 of the 1974 Trade Act on listed EU products. On April 11, 2001, the U.S. and the EU reached an agreement on the matter and the EU has developed a new banana-import licensing system. See 2001 International Law Update 62. By January 1, 2002, the EU will admit an additional 100,000 tons of Latin American bananas, and, by January 1, 2006, the EU will have a tariff-only regime for banana imports. Citation: U.S. Trade Representative press release 01-50 (July 1, 2001); 66 Federal Register 35689 (July 6, 2001).

Chinese court convicts American scholar of spying and orders him expelled. On February 25, 2001, Chinese authorities arrested Li Shaomin, a naturalized U.S. citizen born in China. On July 14, after a four-hour trial in the Beijing Intermediate People’s Court, the tribunal convicted Mr. Li of spying for Taiwan and ordered him expelled from the country. An American diplomat was present to monitor the proceedings. Forty-four years of age, Mr. Li had come to the U.S. in 1982 and later secured a Ph.D. degree from Princeton University. He has given lectures in China and served as a United Nations adviser to Beijing. Mr. Li appears to be still in China and the U.S. Embassy does not know when he is to leave. At least four other native Chinese scholars with U.S. ties are waiting to be tried on espionage charges. For example, the Chinese government arrested Ms. Gao Zhan (a permanent U.S. resident) along with her husband and young son on February 11 of this year. She is a sociologist who has done research in Washington, D.C. The government let her husband and child go after 26 days in custody. There has been no word about Ms. Gao, however, since that time. Other persons similarly detained are Qin Guangguang, Liu Yaping and Teng Chunyan. President Bush has telephoned his concerns over these individuals to Chinese President Jiang Semin, and Congress recently passed a nonbinding resolution calling for their release. Citation: The New York Times, July 15, 2001, Late Edition -- Final, Section 1, page 10, Column 1, byline of Craig S. Smith; The Washington Post, July 25, 2001, page A1.

Council of European Union releases Decision to admit Republic of Korea to Intelligent Manufacturing Systems Steering Committee. An opinion delivered on April 3 by the Council of the European Union confirmed that an exchange of letters was conducted between the European Union, the United States of America, Japan, Australia, Canada, Norway, and Switzerland, concerning the admission of Korea to the International Intelligence Manufacturing Systems (IMS) Steering Committee. The decision announced that Korea has fully complied with the IMS Terms of Reference, and is therefore eligible for representation on the Steering Committee under Chapter IX of the IMS Terms of Reference. The Steering Committee first recommended Korea for representation in November of 1999. The IMS is a coalition of national governments which meets to discuss and arrive at common values and principles relative to international cooperation, in regard to research and development processes and activities concerning intelligent manufacturing systems. Citation: Council Decision 2001/421/EC, 2001 O.J. (L 152) 34, June 7, 2001.

United States and European Union co-sign cooperative energy research agreement. On May 14, 2001, the EU and the U.S. signed both a Cooperation Agreement concerning nuclear fusion, and an Implementing Arrangement regarding cooperation in research and scientific endeavors relative to non-nuclear energy alternatives. These agreements address two of the fifteen fields described in the October 1998 EU-US Cooperation Agreement. A Steering Group, composed of two or three delegates from each side, will supervise the implementation of the agreements. Citation: European Union in US News Release, Number 35/01; May 24, 2001.

President Bush announces continuation of national emergency concerning Burma. President Bush invoked the powers of the International Emergency Economic Powers Act in his May 15th announcement that the United States will continue the national emergency declared on May 20, 1997 by President Clinton, pertaining to Burma. The U.S. maintains its policy that views the present Burmese regime as a threat to the national security and foreign policy of the United States. It is based on the repressive measures taken on the part of the Burmese government against the democratic opposition. Citation: 66 Federal Register 27443 (May 17, 2001).

Chilean appellate court suspends prosecution of General Pinochet. In a 2-to-1 vote, a Chilean court of appeals ruled on July 9 last that 85-year-old Gen. Augusto Pinochet is too ill to go to trial on charges that he had covered up the murders of political opponents committed by a death squad soon after he usurped power in 1973. The majority concluded that his heart problems, strokes and diabetes caused the General to suffer from a mild dementia, serious enough to disable him from defending himself at trial. This victory will adversely affect prosecution of the more than 250 complaints filed against him, alleging major human rights abuses during his seventeen-year tenure. Strictly speaking, the recent appeals ruling amounts to a mere suspension of the prosecution and, theoretically at least, could be reversed if the General’s health were to improve. Blaming behind-the-scenes political pressures, however, human rights lawyers see little likelihood of Pinochet’s trial and conviction. He remained a political force in Chile until 1998, when he resigned as army chief to become a senator for life with legislative immunity from prosecution. The English courts declined to extradite the General to Spain on health grounds and, after sixteen months in detention, they released him to go back to Chile. Back in Chile, the local courts deprived him of his senatorial immunity, indicted him and placed him under house arrest on charges that he had connections with the “caravan of death,” a death squad run by an army intelligence officer using helicopters. During his regime, about 3,200 persons were killed or disappeared and thousands of others were tortured or exiled. Citation: The New York Times, July 10, Late Edition -- Final, Section A, page 1, Column; byline of Clifford Krauss.

President Bush issues executive order to regulate diamond imports from Liberia and Sierra Leone. On May 22, 2001, President George W.  Bush declared by Executive Order that the Revolutionary United Front (RUF)has been conducting an illicit diamond trade to help finance its operations in the Sierra Leone civil war. The Executive Order further recognized that most RUF diamonds leave Sierra Leone through Liberia, referencing United Nations Security Council Resolution Number 1343. UNSCR Number 1343 stated that the RUF could not carry on such an extensive illicit trade without the cooperation of Liberian Government officials at the highest levels. The Executive Order declares a national emergency, and bans the importation of rough diamonds from Sierra Leone, unless controlled by the Certificate of Origin Regime of the Government of Sierra Leone. Also barred is the importation of rough diamonds from Liberia, irrespective of the country of origin. Finally, the Executive Order prohibits any transaction or conspiracy by an individual within the United States to subvert or evade its terms. Citation: 66 Federal Register 28829 (May 24, 2001).

Pakistan ratifies ILO conventions on child and female labor. Seventeen years after their promulgation, the military-led government of Pakistan has ratified two international conventions sponsored by the International Labor Organization of the United Nations. In one, Pakistan undertakes, inter alia, to ban child labor in dangerous industries and the other guarantees that women will get the same wages as male workers for the same work. Labor Minister Omar Asghar Khan pointed to the “great symbolic value” of adopting the two conventions in Pakistan where children as young as five years have dangerous jobs. Surveys report that over 3,000,000 Pakistani children between the ages of 5 and 14 work in such places as tanneries, brick kilns, construction sites, chemical factories and in carpet making. In most instances, the children’s working conditions are unhealthy, and their salaries are low. The convention on children also prohibits all forms of child slavery, trafficking in children, child prostitution and the use of children in pornography. The government has twelve months in which to identify the dangerous sectors where children work and to enact implementing legislation. Citation: The Associated Press (AP), report filed July 21, 2001 at 5:26 p.m. EDT.

President Bush continues national emergency based on presence of weapons-usable fissile material within Russian Federation. On June 11, 2001, President George W. Bush issued a notice to extend the national emergency declared by President Clinton on June 21 of last year regarding Highly Enriched Uranium (HEU) extracted from nuclear weapons of the Russian Federation. President Clinton’s Executive Order blocked from judicial process the property interests of the Government of the Russian Federation which deal directly with carrying out the 1993 HEU agreements. The HEU agreements provided for converting highly enriched uranium, obtained as a byproduct of nuclear weapons, to uranium of lower enrichment levels for use as fuel in commercial nuclear reactors. Such use of weapons-grade fissile materials is consistent with the U.S. security goal to make sure that any nation using materials removed from Russia applies them toward “peaceful commercial” ends. The Clinton Executive Order and the Bush notice invoked the authority of the International Emergency Economic Powers Act (IEEPA), allowing for the declaration of a national emergency to address the threats posed to the security of the U.S. by the risk of nuclear proliferation. The threat is that rogue nations will obtain some of the Russian fissile material and use it to build nuclear weapons. Citation: Federal Register Volume 66, No 115. 66 FR 32207; June 14, 2001; Notice - Continuation of Emergency with Respect to Property of the Russian Federation Relating to the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons, Public Papers of the President, Vol 37, Number 24 (June 18, 2001); Testimony by John A. Gordon, Secretary for Nuclear Security and Administrator, before the House Armed Services Committee, Subcommittee on Military Procurement (June 27, 2001).

US International Trade Commission amends Rules of Practice and Procedure to provide for supervised disclosure of confidential information. Citing Section 335 of the Tariff Act of 1930, the U.S. International Trade Commission has invoked its authority provisionally to amend part 206 of its Rules of Practice and Procedure. The amendment will provide for disclosure of confidential information included in written reports, memoranda, and written submissions filed at any time with the Commission during an investigation under the appropriate section, as long as the material was the subject of an affirmative Commission finding under section 202 of the Trade Act. Part 206 would not allow the disclosure of privileged or classified information, or of any information for which there is a ‘clear and compelling’ interest supporting non-disclosure. After timely application with the Secretary, the amended rule would allow disclosure of eligible materials to an authorized individual under an administrative protective order. As of June 14, 2001, the Commission determined further that the proposed amendment comports with existing legislation. Citation: 66 Federal Register 322117 (June 14, 2001).