Legal Analyses written by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
1999 International Law
Update, Volume 5, Number 3 (March).
COMPETITION
Japan amends Anti-monopoly
Act to require reports to Japan Fair Trade Commission of large mergers and
stock purchases by foreign companies that may affect Japanese markets
Effective January 1, 1999,
Japan has amended its Antimonopoly Act, establishing a Mergers &
Acquisitions notification system even for companies outside Japan. Under the
Amendment, the parties must report mergers between foreign companies to the
Japan Fair Trade Commission (JFTC) if one company has more than 10 billion Yen
in sales in Japan and the other company has more than 1 billion Yen in sales in
Japan. Companies have to file this notice 30 days before the proposed
transaction.
Within 30 days, parties
also have to report certain stock acquisitions by foreign companies to the JFTC.
This provision applies when a company with total assets of more than 2 billion
Yen (and the related parent and subsidiary companies have joint assets of more
than 10 billion Yen) buys (1) stocks of a Japanese company with total assets
of more than 1 billion Yen, or (2) shares of a foreign company with sales in
Japan of more than 1 billion Yen. In either case, the Act demands a report if
the ratio of the stocks that the acquiring company holds compared to the total
outstanding stocks of the acquired company exceeds 10%, 25%, or 50%.
Also companies must notify
the JFTC about major business or assets acquisitions under certain conditions.
In a related development,
the JFTC has issued its interim report on the Introduction of Injunctive
Relief through Civil Litigation. It endorses a civil remedy system to
Antimonopoly Act violations, such as (a) injunctive relief and (b) damage
actions.
Citation:
The Notification System Concerning M&As by Companies outside Japan
(December 21, 1998), as well as the Interim Report on the Introduction of
Injunctive Relief through Civil Litigation (December 22, 1998) are available in
English on the website of the Japan Fair Trade Commission at
www.jftc.admix.go.jp.
CONSULAR CONVENTION
U.S. Supreme Court declines
to entertain last minute original suit filed by Federal Republic of Germany
that would stay Arizona's execution of German national to allow International
Court of Justice to decide Germany's suit alleging infringement of its
national's rights under Vienna Consular Convention
On the afternoon of March
3, 1999, the International Court of Justice (ICJ) issued an order directing
the United States to prevent Arizona's schedule execution of Walter LaGrand.
Claiming that LaGrand had German citizenship, the Federal Republic and others
sought to enforce the ICJ order by asking the U.S. Supreme Court for leave to
file a complaint within its original jurisdiction. Included was a motion for a
temporary restraining order that would stay the U.S. Executive Branch and Jane
Dee Hull, the Governor of Arizona, from carrying out LaGrand's execution. In a
per curiam order, a majority of seven Justices vote to deny both requests.
A five-member majority of
the Court is not convinced that the United States has waived its sovereign
immunity from suit. Nor does the Court see in Article III of the U.S.
Constitution the jurisdictional basis for a suit to delay the execution of a
German citizen who is not an ambassador or consul. As to Arizona, a foreign
government's ability to file a claim against a state finds no clear support in
the Vienna Consular Convention [April 24, 1963, (1970) 21 U.S.T. 77, T.I.A.S.
No. 6820] and probably violates the Eleventh Amendment.
The Court also points out
that the ICJ had filed its order sua sponte and ex parte with no chance for the
United States to respond. The Federal Republic filed the present proceeding
only two hours before LaGrand's scheduled execution on January 15, 1999. This
rested upon a sentence that the Arizona courts imposed in 1984 and that the
Federal Republic had found out about in 1992.
Because of the lateness of
the pleas and the jurisdictional difficulties raised, the Court declines to
exercise its original jurisdiction.
Two Justices concur subject
to the caveat that their decision to deny leave to file the original suit does
not rest upon the Eleventh Amendment.
Two Justices file a
dissent. In their view, Germany sought only to prevent LaGrand's execution
pending a final decision of its action against the U.S. in the ICJ alleging
that Arizona's execution of LaGrand would violate the Vienna Convention. As to
the eleventh hour nature of the present suit, the dissenters believe that
Germany had reasons. It did not decide to file its case in the ICJ until it
discovered eight days ago that Arizona authorities had admitted that they had
known that LaGrand was a German national when they had arrested him.
The dissenters would grant
the preliminary stay to give the Court and the Solicitor General time to brief,
argue and consider the novel issues of jurisdiction and international law that
the case presents. The majority's cautious and hesitant manner in discussing
the Consular Convention and Eleventh Amendment issues implies their recognition
that the issues are uncertain and difficult.
Citation:
Federal Republic of Germany v. United States, 119 S.Ct. 1016 (Sup. Ct. March 3,
1999).
CRIMINAL LAW (JURISDICTION)
First Circuit rejects due
process challenges to conviction for marijuana possession on high seas where
vessel's flag nation consented to application of U.S. law
Three defendants challenged
their convictions for drug-related
offenses that arose out of their possessing marijuana aboard a vessel
named CORSICA. The U.S. Coast Guard had arrested them after it had chased their
ship about 150 miles south of Puerto Rico.
The defendants claimed to
be on a Venezuelan ship which had sailed from Colombia to search for a lost
vessel. They would not allow the U.S. Coast Guard to board without Venezuela's
consent. When the U.S. officers finally boarded after receiving the Venezuelan
"go ahead," they found no illegal items aboard. They soon observed,
however, 20 bales of marijuana floating in the water around the vessel. The
defendants appealed their resulting convictions.
The U.S. Court of Appeals
for the First Circuit affirms. Under the Maritime Drug Law Enforcement Act
(MDLEA), one may not possess a controlled substance on board a vessel subject
to U.S. jurisdiction [46 U.S.C. app. § 1903(a)]. "A vessel subject to U.S.
jurisdiction" includes the shipboard application of U.S. law to persons on
foreign ships where the flag nation has consented or waived objection.
Under the "territorial
principle" of international law, a state may prescribe and enforce a rule
of law in the territory of another to the extent provided by international
agreement with the other state. Under the "protective principle" of
international law, a nation may assert jurisdiction over a person whose conduct
outside the nation's territory threatens the nation's security.
The Court holds that due
process does not require the government to prove a nexus between a defendant's
criminal conduct and the U.S. in an MDLEA prosecution when the flag nation has
consented to the application of U.S. law to the defendants.
"[W]hen individuals
engage in drug trafficking aboard a vessel, due process is satisfied when the
foreign nation in which the vessel is registered authorizes the application of
United States law to the persons on board the vessel. When the foreign flag
nation consents to the application of United States law, jurisdiction attaches
under the statutory requirements of the MDLEA without violation of due process
or the principles of international law because the flag nation’s consent
eliminates any concern that the application of United States law may be
arbitrary or fundamentally unfair." [Slip op. 10].
Citation:
United States v. Cardales, No. 97-2383 (1st Cir. February 26, 1999).
ENVIRONMENTAL LAW
U.S. Commerce Department
issues rule designed to abolish incidental deaths of marine mammals in course
of commercial fishing operations
Under the U.S. Marine
Mammal Protection Act (MMPA), commercial fisheries must gradually reduce
incidental mortality and serious injury to marine mammals to zero by April 30,
2001. The U.S. Department of Commerce, National Oceanic and Atmospheric
Administration (NOAA), National Marine Fisheries Services (NMFS), has issued
a final rule to reduce injury and death to four large whale stocks. The
protected species include the North Atlantic humpback whale, the fin whale, as
well as the minke whale of the Canadian East Coast stock.
The rule provides for time
and area closures for lobster harvesting, as well as for anchored gillnet and
shark gillnet fisheries. It also sets fishing gear requirements such as by
banning long surface lines.
Finally, the rule provides
for fishing gear studies, scientific research, and the improvement of methods
to disentangle whales caught in fishing gear.
The effective date of the
rule will be April 1, 1999.
Citation:
64 Federal Register 7529 (February 16, 1999).
EUROPEAN UNION
For first time in history
of European Union, entire slate of twenty-member European Commission resigns in
wake of highly critical report of European Parliament's committee of experts
On March 16, 1999, all
twenty members of the European Commission announced their resignations. It was
an unprecedented move.
Though the EU now has
fifteen Member States, the five largest countries have two slots and the
remaining ten have one each on the Commission. Under Article 158 of the Treaty
of Rome, the Member States appoint Commission members by common accord to serve
five-year terms. The Council requires a proposal from the Commission before it
can begin the legislative process. Loosely speaking, the Commission serves as
the "executive branch" of the EU government.
The European Parliament
(EP), the only branch of the EU government elected by the peoples of Europe,
has long criticized the way the Commission has been mishandling internal
discipline and budgetary matters. The EP finally appointed a panel of
independent experts to study the inner workings of the Commission bureaucracy.
On the afternoon of Monday,
March 16, the panel issued a scathing report. While the Report did single out
several commissioners by name, the main problem identified was that the Commissioners
have lost control of their huge staff and have ignored widespread fraud,
nepotism and cronyism taking place within their Directorates.
As the Committee pointed
out, European commissioners often admitted that they could not keep track of
what was happening within their Directorates. The Committee also concluded that
the sense of accountability became diluted the further up the management
echelons one inquires. It even declared at one point, "[i]t is becoming
difficult to find anyone [in the Commission] who has even the slightest sense
of responsibility."
A substantial number of
MEPs had reportedly indicated that they would support a motion of censure if
the present membership did not step down voluntarily. Under Article 144 of the
Treaty "[i]f the motion of censure is carried by a two-third majority of
the European Parliament, the members of the Commission shall resign as a body.
They shall continue to deal with current business until they are replaced in
accordance with Article 158."
According to press reports,
Commission President Jacques Santer said that, "in the light of the
report of the committee of independent experts, the members of the commission
decided unanimously to collectively present their resignations."
Presumably, a majority of
the resigned Commissioners will be able, by reappointment, to serve out their
terms. Article 144 provides that upon mass resignation or removal by censure,
"the term of office of the members of the Commission appointed to replace
them shall expire on the date on which the term of office of the members of the
Commission obliged to resign as a body would have expired." Since the present terms expire in January
2000, there may be a number of short-term "caretaker" appointees.
Many MEPs have been
striving for years to find out what is going on behind the Commission's wall
of secrecy and lack of accountability. As a result of the mass resignations,
the press quotes one MEP as declaring that, "A real system of checks and
balances has finally come to Europe."
Citations:
The Guardian (London) 3/17/99; Wall Street Journal (3/17/99, p. A20), Wall
Street Journal Europe (3/16/99, p 1; 3/17/99, p.10) and Agence France-Presse
(3/16/99).
EXTRADITION
In habeas corpus challenge
to certified extradition to Northern Ireland, Tenth Circuit sides with majority
of courts by holding that flight to U.S. in anticipation of arrest or
prosecution tolls statute of limitations
In 1976, George Finbar
Ross, a citizen of the Republic of Ireland, established an offshore investment
company in Gibraltar called International Investment Ltd. ("International
Investment"). He solicited most of his investors from Northern Ireland,
who expected significant, tax-free returns. As it turned out, Ross used the
funds to make unsecured loans to himself and to related companies, as well to
buy a home and some artwork. In 1983, when International Investment had already
become insolvent, Ross moved from Ireland to the U.S. The investors lost
approximately $7,750,000 in the company's later liquidation.
Northern Ireland officials
soon began to look into Ross' activities. In March 1998, authorities arrested
Ross in the U.S. and Northern Ireland immediately requested his extradition
based on the Extradition Treaty between the Government of the United States of
America and the Government of the United Kingdom of Great Britain and Northern
Ireland of 1976 [28 U.S.T. 227].
A U.S. magistrate certified
Ross as extraditable under the Treaty and ordered him held in custody until
his actual delivery. Ross then filed a petition for habeas corpus pursuant to
28 U.S.C. Section 2241. Ross unsuccessfully claimed that (1) the charges were
time-barred, and (2) the charges of "false accounting" fail to meet
the dual criminality requirement. The U.S. Court of Appeals for the Tenth
Circuit affirms.
Under Article V of the Extradition
Treaty, the prosecution must not be time-barred under either party's laws.
Northern Ireland does not have a statute of limitations that would apply to
Ross' charges. In the U.S., 18 U.S.C. § 3282 provides for a five-year statute
of limitations that stops running during a period in which the subject is a
fugitive "fleeing from justice" (see 18 U.S.C. Section 3290). While
Northern Ireland is seeking extradition for alleged crimes that took place
about 12 years before, Ross probably had the intent to avoid prosecution or
arrest when he took off to the U.S.
"A small minority of
circuits have held mere absence from the jurisdiction in which the crime was
committed is enough to toll the statute. ... The district court, on the other
hand, adopted the majority view, which requires the prosecution to prove the
accused had an intent to avoid arrest or prosecution. ... The Supreme Court has
not squarely addressed the issue. However, in considering the predecessor to
18 U.S.C. § 3290, the Court in Streep v. United States ... implicitly
recognized intent as an element of fleeing from justice ... Consistent with
Streep, we conclude 'fleeing from justice' requires the government to prove, by
a preponderance of the evidence, the accused acted with the intent to avoid
arrest or prosecution." [Slip op. 7-9].
Northern Ireland had not
yet begun its investigation of International Investment when Ross moved to the
U.S. Ross, however, knew that the company was insolvent and that a financial
audit would take place in Gibraltar to renew the banking license. Fugitivity
with intent to avoid an anticipated arrest or prosecution is enough to toll the
statute.
Finally, the Court rejects
Ross' dual criminality argument. U.S. mail and wire fraud laws, unlike the
Northern Ireland Theft Act, require proof that the defendant carried out the
fraud by use of the mail or interstate wire transmissions. All of those laws,
however, prohibit the same conduct -- use of false representations. The U.S.
requirement of use of the mails or wire transmissions is merely a
jurisdictional element to make the crime "federal" in nature.
Citation: Ross
v. U.S. Marshal for the Eastern District of Oklahoma, No. 98-7083 (10th Cir.
February 17, 1999).
FORUM NON CONVENIENS
In federal litigation over
fatal air crash in France, Tenth Circuit upholds dismissal on forum non
conveniens grounds, ruling that lower court did not abuse discretion in
downgrading foreign plaintiff's choice of American forum, or in deciding that
French products liability law would apply or in weighing private and public
interests
In 1993, Cyril Gschwind, a
French citizen living in Belgium, was the European distributor for Cessna
Caravan Aircraft. His company did business as Aviation and Services Europe with
offices in France.
On August 16 of that year,
Gschwind died when the Cessna Caravan 208B he was piloting crashed near Cannes,
France. Most of the Caravan's wreckage is still in France.
During this period, there
was French litigation over Gschwind's possible misuse of funds from a British
aircraft company. This setback coupled with Gschwind's fax to a friend asking
him to look after the Gschwind family should anything happen on the upcoming
flight suggested possible suicide.
In an Ohio state court,
Gschwind's widow, Virginie (plaintiff) brought a wrongful death action against
Cessna, the Kansas manufacturer of the Caravan 208B, as well as the Canadian
manufacturer of the engine and the Ohio manufacturer of the propeller.
Defendants removed the case to federal court where Cessna moved to dismiss on
the grounds of forum non conveniens. After the magistrate transferred the case
to a Kansas federal court, the district court there granted the motion subject
to five conditions.
First, defendants were to
produce their employees, officers and records in France at their own expense.
Second, they would make good faith and reasonable efforts to secure the
attendance of former employees and officers. Third, defendants would waive any
limitations defenses that would not have been available to them had plaintiff
filed her case in France on the same date she had filed it in Ohio. Fourth,
defendants would transport all physical evidence back to France. Fifth,
defendants would voluntarily enter their appearances in plaintiff's French
litigation. Finally, they would consent to reinstatement of the U.S. case if
the French courts refuse to accept jurisdiction over the matter. Plaintiff
noted her appeal.
The U.S. Court of Appeals
for the Tenth Circuit affirms.
The Court first discusses
two threshold questions in the forum non conveniens calculus: (1) whether
plaintiff has an adequate alternative forum in which defendants are amenable to
process and (2) whether foreign law applies. A negative answer to either
question forestalls dismissal. Affirmative answers to both, however, require
the Court to analyze the private and public interests at stake.
In the case of a foreign
plaintiff filing in an American court, the Court will give less deference to
her forum choice. Moreover, the private and public interest factors need not so
heavily weigh in favor of the alternate forum. The standard on appellate review
is abuse of discretion.
Since France recognizes
products liability claims and since defendants have consented to be sued there,
there was no error in the district courts' ruling on the alternative forum
issue. Plaintiff contended, however, that the French court system is inadequate
because the French courts stay pending civil actions until they complete their
criminal proceedings. The Court disagrees that the possibility of delay amounts
to a denial of due process. Nor did the lower court's failure to make
defendants waive all possible French limitations defenses result in unfairness
to plaintiff.
On the applicable law, the
Court concludes that the lower court properly applied Ohio conflicts rules in
this transferred case to conclude that French law would apply to the case. It
rejects plaintiff's claim that the district court gave too little weight to the
interests of Kansas in having its law applied as the situs of the alleged
tortious conduct.
The Court next evaluates
the lower court's application of the private interest elements. As to access to
evidence, the Court agrees with the judgment below that the conditions ensure
the access of both sides to manufacturing data and other pertinent records in
the United States. Moreover, any evidence as to decedent's possible
contributory negligence or suicide due to business adversities lies in France.
Plaintiff also argued that
the lower court mistakenly failed to take into account that Cessna was a forum
resident. Here, however, one moving defendant was a resident of Canada, thus
greatly diluting this factor. Moreover, local residence is weightier when
defendant is an individual rather than an international corporation like
Cessna.
As to the public interest
factors, plaintiff makes only two points. She argued that it was unfair to hold
the lower court's congested docket against her since defendants were the
authors of all the pending motions to dismiss.
In the Court's view,
plaintiff misread the trial court's statements. "The court was not
referring to congestion in this particular case, but rather a build‑up of
motions and cases before the District of Kansas as a whole. Under Piper and
Gulf Oil, it is proper for the district court to consider the administrative
difficulties this case would pose to the District of Kansas in deciding the
forum non conveniens issue." [609]
Plaintiff also complained
that the district court had put too much reliance on its ignorance of French
law as a public interest factor supporting dismissal. "Considering,
however, that we have determined that the district court did not err in
weighing the administrative burden against the plaintiff, along with the fact
that France had a greater 'localized' interest in the matter, it can hardly be
said that the district court relied solely on its unfamiliarity with French
law. ... There is no abuse of discretion with regard to the public interest
factors." [id.]
Citation: Gschwind
v. Cessna Aircraft Co., 161 F.3d 602 (10th Cir. 1998).
HUMAN RIGHTS
European Court of Human
Rights rules that official tapping of multiple law firm telephone lines by
Swiss government during criminal investigation of attorney's wife violated
privacy rights of attorney as guaranteed by Article 8 of Human Rights
Convention
In February 1988, a client
asked Mr. Hauser, a member of the law firm of Kopp and Partners, to verify the
legality of a request for judicial assistance sent to Switzerland by the
United States authorities in a tax matter. After studying the file, Hauser
declined to accept the work. He cited a standing instruction to members of the
firm to refuse all cases concerning the Federal Department of Justice and
Police, which Mrs. Kopp headed at that time.
The Kopp firm then sent the
file to a Zurich law firm. This firm then asked the Federal office of Police in
June if they could examine the letter of request. On 23 August 1988, the
Federal Office sent the firm an abridged version of the document, redacting a
confidential section that dealt with organized crime.
Between November 21 and
December 11 of 1989, the Swiss government conducted an official tapping of all
of the lines of the Kopp law firm as part of a criminal investigation involving
Kopp (as a third party) and his wife, Elizabeth as suspect. As former head of
the Justice Department, there were suspicions that she might have leaked
secrets dealing with an organized crime investigation and been involved in
money laundering.
The President of the
Indictment Division of the Federal Court had approved that wire-tapping
measure. As Swiss law requires, the government notified Kopp of the tapping and
its duration. (The government later cleared Mrs. Kopp of the charges).
Mr. Kopp then filed an
unsuccessful action in the Swiss courts alleging that the tapping violated the
Federal Criminal Procedure Act (FCPA) and Article 8(2) of the European
Convention on Human Rights. He next applied to the Human Rights Commission. The
Commission held an inquiry and then referred the matter to the Court to consider
the merits of the Convention claim. A six-judge panel of the Strasbourg Court
rules unanimously in favor of applicant.
To give the Contracting
State a chance to set the alleged violations right, Article 26 requires
preliminarily that the applicant exhaust all domestic remedies by timely
action typically before the appropriate local courts. In his appeal to the
Swiss Federal Council in December 1992, applicant put forth an argument
entitled "Violation of Article 8 of the Convention." In the Court's
view, this was sufficient compliance with Article 26, despite the government's
objections.
Interception of phone
messages violates Article 8 unless (1) it is in accordance with the law, (2)
pursues one or more of the proper aims spelled out in Article 8(2) and (3) and
it is "necessary in a democratic society" to reach those aims. In
principle, the Court is not in a position to disagree with Swiss police or
judicial authorities on the legality of the tapping under the FCPA. On this
basis, the Court accepts that the tapping had a legal basis in Swiss law.
The Court does see a
problem, however, in the lack of the laws' "foreseeability" as to the
meaning and nature of the applicable measures. Subject to § 77 of the FCPA, §
66 generally allows monitoring of third parties if they appear to be giving
information to, or receiving information from, the accused or suspect. Section
77 provides that "... lawyers ... cannot be required to give evidence
about secrets confided to them on account of their ... profession."
Though the Swiss police and
courts did refer to § 77, the order still allowed monitoring of all the firm's
telephone lines. Such tapping amounts to a major interference with applicant's
private life and communication. Thus, to pass muster, the regulatory scheme
demands a high degree of detail and precision, particularly as intrusive
technology becomes more sophisticated.
Despite this, Swiss law
does not clearly set forth how, under what conditions and by whom the
distinction is drawn between lawyer-client affairs and non-legal
communications. Thus, neither written or unwritten Swiss law is clear enough as
to how government officials should exercise their discretion in this area. As a
result, the applicant, as a lawyer, did not have the minimum degree of
protection required by the rule of law in a democratic society, thus violating
his Article 8 rights.
As to pecuniary damages,
however, applicant could not prove a nexus between the interception of calls
and economic loss. On an equitable basis, the Court nevertheless awards
applicant 15,000 Sfr. to be paid within 90 days of judgment.
Citation:
Kopp v. Switzerland (App. No. 23224/94) 27 E.H.R.R. 91 (1999).
HUMAN RIGHTS
U.S. Immigration and
Naturalization Service issues interim rule to carry out Convention Against
Torture by protecting foreign nationals threatened with torture if sent back
to their home states
The U.S. Department of
Justice, Immigration and Naturalization Service (INS), has issued an interim
rule to establish procedures for raising a claim for protection from torture [8
C.F.R. Parts 3, 103, 208, 235, 238, 240, 241, 253, 507]. This implements parts
of the United Nations Convention Against Torture and Other Cruel, Inhuman, or
Degrading Treatment or Punishment [G.A. Res. 39/46, December 10, 1984;
reprinted in 23 I.L.M. 1027 (1984), 24 I.L.M. 535 (1985)].
Article 3 of the Convention
obliges the U.S. not to expel, return or extradite a foreign person to another
country where he or she would be tortured. With this interim rule, the U.S.
will include this obligation in reviewing requests for asylum claims and for
withholding of deportation proceedings.
The new rule sets up a
screening mechanism for such claims of possible torture abroad. It also
provides for a "deferral of removal" for those persons whom the INS
would otherwise deport from the U.S.
The effective date of the
interim rule is March 22, 1999.
Citation:
64 Federal Register 8478 (February 19, 1999).
PROFESSIONAL ETHICS
House of Lords rules that
international accounting firm that formerly represented Prince of Brunei in
private financial litigation cannot later be retained by government of Brunei
to investigate Prince's stewardship of major government investment agency
merely by erecting "Chinese Wall" around those in government project
KPMG was the English branch
of a world-wide firm of accountants with 5,000 employees in the London office
alone. It has been acting as the annual auditors of the core assets of the
Brunei Investment Agency (BIA) since its creation in 1983. BIA's function was to possess and manage the general reserve fund
of the Government of Brunei along with its external assets and to furnish the
government with money management services. Disclosure of its activities is a
criminal offense.
Prince Jefri Bolkiah, the
youngest brother of the Sultan, had chaired the BIA until his removal in 1998.
Between 1996 and 1998, the Prince, in his personal capacity, had retained KPMG
to support him or one of his companies in private litigation (the Manoukian
case). The case had a code name "Project Lucy." The firm had furnished
litigation support services in that case resembling that usually supplied by
solicitors.
In so acting, the Prince
entrusted KPMG with large amounts of confidential information about his assets
and financial affairs. The case was settled in March 1998. KPMG had employed
168 individuals on the litigation and the Prince had paid them about British
Pounds 476,000 for their services.
At about the same time, the
Prince had lost his position as chairman of the BIA. In June 1998 the
government of Brunei launched an official inquiry into how the Prince and
others had managed BIA affairs. For example, they were looking for the present
site of various sums of money that exited the BIA during the Prince's
stewardship.
The government wanted to
hire KPMG to help in tracing and accounting for the funds. The firm felt able
to take on the new assignment because the Prince was no longer one of their
clients. Out of an abundance of caution, however, it tried to avoid a conflict
of interest between its former confidential dealings with the Prince and undertaking
what probably would be an inquiry adverse to the Prince's interests. It
therefore set up an information barrier or "Chinese wall" around the
department that would be helping the Brunei government in looking into BIA
affairs.
KPMG had not told the
Prince about the barrier nor had it gotten his consent to take part in the
investigation. When he found out, the Prince went to an English court and
obtained an order enjoining KPMG from continuing to serve in the official
probe.
KPMG, however, obtained
review in the Court of Appeal and persuaded it to discharge the injunction. The
Court ruled that the only duty that KPMG had was to take reasonable steps to
safeguard the Prince's confidential information. After balancing the competing
interests, it ruled that KPMG had taken suitable means to avoid any serious
risk that a member of the firm would disclose the Prince's confidential data to
the quarantined department of KPMG.
The House of Lords granted
review and allows the appeal. It first points out that an accountant furnishing
litigation support had an ongoing professional duty to a former client to
shelter the confidentiality of information received during that prior relationship.
This was an unqualified obligation. It demanded that the accountant in fact
ensure nondisclosure not merely take reasonable steps to do so. Moreover, the
accountant had an absolute duty not to misuse the information to the prejudice
of the former client.
In this case, the Lords
note, a former client had shown that KPMG had confidential information of his,
that he had not agreed to its disclosure and that KPMG was on the point of
acting for a new client with interests adverse to the him in an inquiry to
which the secrets may be relevant. Under these circumstances a court would
restrain the firm from working with the
new client unless it could show by clear and convincing evidence that the
measures taken effectively prevented any risk of even inadvertent disclosure to
the new client.
"Chinese walls"
or other similar quarantine devices may serve the turn in some instances. The
presumption, however, is that information circulates through the members of
such firms. Thus, for barriers to be successful, they must be an established
part of the firm's organizational structure, not merely an ad hoc creation.
As the record in this case
shows, KPMG has not carried its heavy burden of guaranteeing the continued
confidentiality of the former client's information during the government's
investigation. The House of Lords thus allows the appeal.
Citation:
Prince Jefri Bolkiah v. KPMG (a firm), [1999] 1 All ER 517 (House of Lords).
SOVEREIGN IMMUNITY
In Ghana's suit to evict
employee from government housing, Second Circuit upholds counterclaim for unlawful
discharge under 28 U.S.C. § 1607 as "logically related" to main claim
but rejects claims for fraud, false imprisonment and intentional infliction of
mental distress under same test
In 1983, Bawol Cabiri
entered into an employment contract with Ghana to act as its trade
representative to the United States. During his employment, Ghana provided him
with a home in the New York suburbs.
Three years later, his
government recalled him to Ghana. Treating him as a suspect in a planned coup
d'etat, it allegedly imprisoned and tortured him. In 1991, the government sent
him back to the U.S. Meanwhile, his wife Efua and his family had been living in
the suburban New York house despite government efforts to "retire"
Bawol and judicially evict the family.
In counterclaims to the
eviction case, Bawol had alleged breach of contract, abuse of trust, fraudulent
misrepresentation, false imprisonment and intentional infliction of emotional
distress. Efua also asserted a counterclaim for intentional infliction of
emotion distress in Ghana's refusal to tell her what was happening to Bawol
back in Ghana. In settling this case, Ghana agreed to waive sovereign immunity
in a federal action to the extent the counterclaim or other exception in the
FSIA would remove immunity.
When the Cabiris filed
their suit in federal court, however, the district court dismissed the action
for lack of subject matter jurisdiction under the FSIA. In their appeal, both
plaintiffs relied on the counterclaim exception under 28 U.S.C. § 1607 and on
implied waiver under 28 U.S.C. § 1605(a)(1) as to all claims. Efua also invoked
§ 1605(a)(5) for non-commercial torts committed in the U.S. The U.S. Court of
Appeals for the Second Circuit reverses and remands.
On the counterclaim
exception, the Court first quotes the pertinent part of § 1607. It provides
that "In any action brought by a foreign state, or in which a foreign
state intervenes, in a court of the United States or of a State, the foreign
state shall not be accorded immunity with respect to any counterclaim ... (b)
arising out of the transaction or occurrence that is the subject matter of the
claim of the foreign state..." In construing similar language in Federal
Civil Rule 13(a), the Court has applied a broad "logical
relationship" test.
The Court finds the
necessary nexus between the eviction claim and Bawol's contract counterclaim.
"[U]nder the contract, Bawol Cabiri's possession of the property was an
incident of his employment. So the main issue in the eviction proceeding (as
recognized in Ghana's pleadings before the state court) was whether Cabiri's
employment was lawfully terminated. The eviction proceeding and the breach of
contract claim alike concern the same employment contract and relationship, and
the core issue in both claims is whether Cabiri's employment was lawfully
terminated." [Slip op. 4]
Cabiri is unsuccessful,
however, with his abuse of trust and fraud claims. "Unlike Cabiri's breach
of contract claim, these two claims, and the evidence required to establish
them, do not concern whether the contract was lawfully performed or
terminated. We agree with the district court that there is no logical
relationship between these claims and the eviction proceeding and therefore
that these claims did not arise out of the same 'transaction or
occurrence.'" [Slip op. 5]
Bawol's claims for false
imprisonment and for emotional distress infliction and Efua's claim for the
latter tort meet a similar fate. The Court finds that these claims lack a
"sufficient logical relationship" to Bawol's employment contract and
its termination to come within § 1607.
Invoking § 1605(a)(5), Efua
separately argued that her intentional infliction of emotion distress claim
stems from tortious acts committed within the U.S. by officials at Ghana's New
York mission in repeatedly refusing to give her any accurate news of Bawol's
fate. Her major obstacle is the proviso that the FSIA carves out of the tortious
act provision for torts of misrepresentation or deceit.
"In an effort to plead
around the proviso of subsection (a)(5)(B) the complaint is cast in terms of
the intentional infliction of emotional distress. However cast, the wrongful
acts alleged to have caused the injury are misrepresentations made to Efua
Cabiri concerning her husband's whereabouts. ... [W]e ... conclude with confidence
that Ghana enjoys immunity as to this claim‑‑for emotional injury caused by the
refusal of a foreign state, however nefarious, to give its citizens in the
United States full or truthful information concerning its operations. The FSIA
is not an enforcement mechanism for global freedom of information." [Slip
op. 6]
Finally, the Court is
unable to find an implied waiver of sovereign immunity pursuant to §
1605(a)(1). "Here, Ghana has taken no action that can be understood to
demonstrate either an objective or a subjective intent to waive immunity with
respect to these claims; and Ghana's commencement of proceedings in New York to
evict plaintiffs from a house that Ghana owns (even if occupancy is arguably
the contractual perquisite of an employment relationship frustrated by Ghana's
wrongful detention and torture of its employee in Ghana) does not require us to
decide the circumstances, if any, under which a foreign state forfeits
immunity." [Slip op. 8]
Citation:
Cabiri v. Republic of Ghana, 1999 WL 27480 (2nd Cir.(N.Y.)).
TRADE
WTO Appellate Body largely
affirms lower panel in U.S.-Japan dispute over Japan's strict quarantine and
fumigation requirements for imported agricultural products
On February 22, 1999, the
Appellate Body of the WTO largely affirmed the previous Dispute Settlement
Panel Report on the U.S.-Japan dispute over imports of agricultural products
into Japan. The U.S. had brought the original complaint in April 1997 to
challenge Japan's testing and efficacy standards for quarantine treatments of
certain agricultural varieties ("the varietal testing requirement").
Japan's Plant Protection
Law of 1950 and the Plant Protection Law Enforcement Regulation consider eight
agricultural products potential hosts of the pest "codling moth."
Thus, the imports of apples, cherries, peaches, nectarines, walnuts, apricots,
pears, plums and quince are subject to Japanese quarantine or fumigation with
methyl bromide.
The Dispute Settlement
Panel issued the original opinion on October 27, 1998 (see 1998 Int’l Law
Update 145), finding that Japan's requirements were inconsistent with the
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS
Agreement), as lacking a scientific basis, and being unduly trade restrictive
(see Articles 2.2 and 5.6, Annex B, & Article 7). In November 1998, Japan
decided to appeal to the Appellate Body.
The Appellate Body
essentially upholds the Panel Report, concluding that Japan's import
restrictions on the specified products lack a scientific basis and contravene
the SPS Agreement (see Part VII).
Citation:
Japan - Measures Affecting Agricultural Products (WT/DS76/A/R), 22 February
1999. [The Appellate Body opinion is available on the WTO website at
www.wto.org].
- Swiss High Court bars
use of "Bud" to designate U.S. beer. In a dispute over the use of
the designation "Bud" and "Budweiser" for beer brands, the
Swiss High Court (Bundesgericht) decided on February 25, 1999, that the U.S.
company Anheuser-Busch cannot sell its brand under the name "Bud" in
Switzerland even though it holds the Budweiser trademark in several other
European countries. The German name "Budweiser" originated in Budweis
in what is now the Czech Republic. Immigrants later took that designation to
the U.S. The Court held in favor of the Czech brewery Budvar because it had
used the name "Bud" first in Switzerland. Consumers may easily
confuse the name "Bud" for the U.S. brand with the Czech brands
"Budweiser Budvar" or "Budbraeu." Citation: Schweizer
Bundesgericht, Aktenzeichen 4P.164,254/1998. [The court's opinion will become
available within a few months; Reuters press report (February 25, 1999); Neue
Zuercher Zeitung, February 26, 1999].
- U.S.-Vietnam Copyright
Agreement enters into force. According to a statement
of the U.S. Trade Representative, the U.S. and Vietnam have completed the
formal steps to implement their bilateral Copyright Agreement. The Agreement
entered into force by exchange of diplomatic notes on December 23, 1998. For
the first time, the parties have an Agreement designed to protect U.S.
copyrighted works in Vietnam such as motion pictures, sound recordings,
software and books. The U.S. has reciprocally extended domestic copyright
protections to Vietnamese works as well. Citation: U.S. Trade
Representative press release 98-116 (December 23, 1998).
- U.S. and Cambodia
conclude bilateral textile agreement. On January 21, 1999, the U.S. and
Cambodia entered into a three-year agreement on textile trade. Providing for
cooperation based on a quota framework, it will open the Cambodian market to
U.S. textile products, and improve job conditions for Cambodian workers. Citation:
U.S. Trade Representative press release 99-07 (January 21, 1999).
