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.

2002 International Law Update, Volume 8, Number 5 (May)

CHILD ABDUCTION

In case under Hague child abduction convention involving allegations of sexual abuse by father, First Circuit reverses because district court had failed to determine whether abuse had taken place before deciding whether to order children returned to Sweden

Kristina McLarey is a dual citizen of Sweden and the U.S. She married Iraj Danaipour, a child psychologist originally from Iran with Swedish citizenship. They had two daughters, born in Sweden in 1994 and 1998. The marriage began to fall apart while McLarey and Danaipour were living together in Stockholm. McLarey found her husband abusive and suspected that he had improper sexual contact with the daughters. A Swedish court first awarded Danaipour custody of the children, but later granted joint custody with weekly alternation. Swedish police investigated the allegations of sexual abuse but never charged Danaipour.

In June 2001, McLarey and her children came to the U.S. in violation of the Swedish court order. A clinical psychologist interviewed the children and found indications of sexual abuse. A few months later, Danaipour sued McLarey in Massachusetts state court seeking the return of the children under the Hague Convention on the Civil Aspects of International Child Abduction (Oct. 25, 1980, T.I.A.S. 11,670, 1343 U.N.T.S. 89). Defendant removed the case to federal district court.

McLarey raised three defenses: (1) that “there is a grave risk that ... return would expose children to physical or psychological harm or otherwise place the children in an intolerable situation” (Article 13(b) of the Convention); (2) that return would contravene “fundamental principles of the requested State relating to the protection of human rights and fundamental freedoms” (Article 20); and (3) that the children object to being returned, having ‘attained an age and degree of maturity at which it is appropriate to take account of [their] views” (Article 13).

The district court appointed a guardian ad litem (GAL) and held hearings on how to ascertain whether sexual abuse had taken place. The district court denied McLarey’s motion to have a sexual abuse evaluation done in the U.S., and ordered her to return with the children to Sweden, subject to several conditions. For one thing, the district court required that the children live with McLarey unless otherwise directed by a Swedish court, and that qualified persons do a forensic evaluation of the abuse charges. McLarey appealed the district court’s order.

The U.S. Court of Appeals for the First Circuit reverses and remands. It first notes that the Convention established a strong presumption that favors the return of wrongfully removed children.

“[T]he district concluded [that] the evaluation could be done as well in Sweden as here. (Cit.) Implicit in this conclusion is a determination that, even if the children had been sexually abused, they could be returned, and the onus would fall upon the Swedish authorities to protect them. Without deciding that there could never be a situation in which a district court could properly decline to make a finding on sexual abuse allegations or defer such a finding to the courts of the country of habitual residence, we hold on the facts and the applicable law here that the district court violated the terms of the Hague Convention.” [Slip op. 32]

The lower court went astray in several respects. First, it failed to analyze whether there was a “grave risk” to the children in the context of the strong U.S. policy in favor of protecting children from sexual abuse. Second, it wrongly assumed that the Convention empowered the courts of the country of habitual residence to answer the grave-risk question. Third, later events in Sweden showed that the district court was incorrect in believing that the Swedish courts would supervise a forensic sexual abuse evaluation. Finally, the district court’s conditions went beyond its authority in trying to impose requirements on a foreign court.

Citation: Danaipour v. McLarey, 286 F.3d 1 (1st Cir. 2002).

COMMUNICATIONS

Resolving conflicting lower court rulings, Canadian Supreme Court holds that Radio Communications Act bars unlicensed Canadian company from enabling Canadian consumers to pick up and decode direct-to-home satellite signals from United States

Bell ExpressVu Limited Partnership(Bell) distributes direct‑to‑home (DTH) television programming under government license and encodes its Canadian satellite signals to limit those able to get them. Richard Rex, c.o.b. as 'Can‑Am Satellites' and others (collectively “Rex”), markets decryption systems to Canadian consumers that enable them to watch U.S. DTH programs. Canadian law bars non-Canadian broadcasters from marketing their programs in Canada. Since the U.S. broadcasters will not intentionally let persons outside the U.S. decode their satellite signals, Rex furnishes U.S. mailing addresses to those of its Canadian customers who lack them.

Bell sued Rex in the British Columbia Supreme Court, pursuant to Sections 9(1)(c) and 18(1) of the Radio Communication Act. It asked the Court to enjoin Rex from helping Canadian residents to subscribe to, and decrypt, U.S. DTH programming. Section 9(1)(c) authorizes the courts to issue injunctions against the decoding of encrypted signals without the permission of the “lawful distributor of the signal or feed.” The chambers judge declined in 1999 to grant the injunctive relief.

In 2000, a majority of the B.C. Court of Appeal dismissed Bell’s appeal. It ruled that the decoding of unregulated signals such as those broadcast by the U.S. DTH companies, does not violate Section 9(1)(c). In granting review, the Supreme Court of Canada saw the issue as (1) whether Section 9(1)(c) bans the decoding of all encrypted satellite signals, with a limited exception, or (2) whether it bars only the unauthorized decoding of signals from licensed Canadian distributors. In allowing the appeal, the Court decides that the first reading is the correct one.

Before it decides that the words of a statute are ambiguous, a Canadian court first has to follow the preferred contextual and purposive approach to interpretation. It must read the words of the Act in their complete context and in their grammatical and usual sense in such a way as to harmonize with the scheme of the Act, its purpose and Parliament’s intent. Only when an authentic ambiguity surfaces between two or more plausible readings, each equally consistent with statutory intentions, do the courts need to look to extrinsic interpretative aids. Two examples of the latter would be the strict construction of penal statutes and the “Charter values” presumption.

“For this reason, ambiguity cannot reside in the mere fact that several courts ‑‑ or, for that matter, several doctrinal writers ‑‑ have come to differing conclusions on the interpretation of a given provision. Just as it would be improper for one to engage in a preliminary tallying of the number of decisions supporting competing interpretations and then apply that which receives the ‘higher score,’ it is not appropriate to take as one's starting point the premise that differing interpretations reveal an ambiguity. It is necessary, in every case, for the court charged with interpreting a provision to undertake the contextual and purposive approach ..., and thereafter to determine if ‘the words are ambiguous enough to induce two people to spend good money in backing two opposing views as to their meaning’ (Cit.)” [Slip op. 37-38]

The Supreme Court fails to find ambiguity in the Act. “In the end, I conclude that when the words of Section 9(1)(c) are read in their grammatical and ordinary sense, taking into account the definitions provided in Section 2, the provision prohibits the decoding in Canada of any encrypted subscription programming signal, regardless of the signal's origin, unless authorization is received from the person holding the necessary lawful rights under Canadian law.” [Slip op. 48] The U.S. DTH distributors in the instant case are not “lawful distributors” as defined in the Act. Interpreting Section 9(1)(c) as an absolute bar with a limited exception harmonizes with the objectives set out in the Broadcasting Act and complements the scheme of the Copyright Act.

Citation: Bell ExpressVu Limited Partnership v. Rex, 2002 Can. Sup. Ct. LEXIS 46; 2002 S.C.C. 42 (Can. Sup. Ct. April 26).

COMPETITION

In private antitrust action against two leading auction houses, Second Circuit holds that Foreign Trade Antitrust Improvements Act of 1982 did not overrule prior circuit law on applicability of Sherman Act to antitrust violations committed abroad

Plaintiffs filed a class action against Christie International Plc (Christie’s), a United Kingdom corporation, and Sotheby’s Holdings, Inc. (Sotheby) a Michigan corporation, along with many of their local subsidiaries, directors and officers. These two companies are the world's first and second largest auctioneers of fine art, antiques, collectibles, and other items, together controlling 97% of the market. Christie's and Sotheby's hold auctions at various sites around the world, including London and New York City.

The complaint charges that the defendants agreed to fix the prices which they charged their clients for their auctioneering services. (The defendants have already settled with a class of plaintiffs who bought or sold goods in domestic U.S. auctions.) The present litigation continues with a plaintiff class that claims injury from having to pay inflated commissions to defendants in buying or selling at their foreign auctions.

The foreign class plaintiffs filed their Consolidated Amended Complaint on October 30, 2000. There are eight foreign class plaintiffs, four from the United States and four from foreign nations. They sued under sections 4 and 16 of the Clayton Act, 15 U.S.C. Sections 15, 26, alleging that the defendants violated sections 1 and 3 of the Sherman Act, 15 U.S.C. Sections 1, 3, by agreeing to fix their buyer's premiums and seller's commissions. They seek damages and injunctive relief.

The District Court dismissed plaintiffs’ case for lack of subject matter jurisdiction. It read current law as allowing suit only [1] where the alleged misconduct had direct substantial and reasonably foreseeable effects in the U. S. and [2] where the domestic effects that gave rise to jurisdiction also caused the plaintiffs’ alleged injuries.

The U.S. Court of Appeals for the Second Circuit rules that defendants’ reading of the FTAIA does not square with the unambiguous text of the statute; it does not change the National Bank of Canada rule. The Court concludes that the defendants' alleged conduct qualifies under either prong of its test.

Before 1982, the law of the Second Circuit was that an antitrust action in federal court based on conduct directed at foreign markets had to have the “effect of” injuries to U. S. commerce that reflects the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation. See National Bank of Canada v. Interbank Card Assoc., 666 F.2d 6, 8 (2d Cir.1981). In 1982, Congress, as an amendment to the Sherman Act, passed the Foreign Trade Antitrust Improvements Act of 1982, Pub. L. 97‑290, 96 Stat. 1246 (codified at 15 U.S.C. Section 6a) (the FTAIA). The defendants here argued that the Act exempts their alleged conduct from antitrust scrutiny. On the other side, plaintiffs contended (1) that the FTAIA is inapplicable to this case and (2) that, if applicable, it would not bar their suit against defendants. The effect of the FTAIA on prior circuit law is a matter of first impression for the Court.

The Court affirms the district court's ruling that the FTAIA applies to the defendants' alleged conduct. On the other hand, the plaintiffs' complaint does depict conduct that has the requisite “effect” on domestic commerce under the FTAIA to be regulated by the Sherman Act. Hence the Court vacates the district court's judgment granting the defendants' motion to dismiss and remands the case for further proceedings consistent with its opinion.

Assuming the truth of plaintiff’s allegations, as did the lower court, the following is background to the suit. At their auctions, in return for the auctioneer's services, the buyer of an auctioned item pays the auctioneer a “buyer's premium,” while the seller pays the auctioneer a “seller's commission.” Defendants calculate the fees as a percentage of the purchase price of the auctioned item.

From late 1992 until at least February 2000, Christie’s and Sotheby’s allegedly had an ongoing agreement to set the buyer's premiums they charged at identical levels. In November 1992, Sotheby's declared that it would raise its buyer's premiums from 10% to 15% for the first $50,000.00 of the purchase price. The following month, Christie's announced the same increase in its buyer's premiums. In addition, the defendants allegedly agreed not only to keep these premiums in effect but also to set their seller’s commissions at the same levels. In early 1995, both companies stopped negotiating over lowering seller’s commissions and put into effect a fixed schedule of non-negotiable seller’s commissions ranging between 2% and 10%.

The Court first notes that the antitrust laws seek to foster competition in the U.S. markets, even in situations where foreign markets are also involved. “There is a distinction between anticompetitive conduct directed at foreign markets that only affects the competitiveness of foreign markets and anticompetitive conduct directed at foreign markets that directly affects the competitiveness of domestic markets. The antitrust laws apply to the latter sort of conduct and not the former. Our markets benefit when antitrust suits stop or deter any conduct that reduces competition in our markets regardless of where it occurs and whether it is also directed at foreign markets. On the other hand, our markets do not benefit when antitrust suits stop or deter anticompetitive conduct directed at foreign markets without an effect on our markets. ...”

“Ever since Judge Learned Hand's seminal opinion in United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir.1945) (‘Alcoa‘), it has been clear that the focus in determining whether the antitrust laws govern conduct is the conduct's effect on the domestic market rather than the situs of the conduct itself.” [393] Believing that an unqualified “effects” test is too broad, the Second Circuit has demanded proof of negative or injurious effects on a U.S. market.

In the first place, the Court rejects plaintiffs’ contentions that the U.S. situs of several meetings to discuss the price fixing agreement itself makes the FTAIA inapplicable here. It also turns aside plaintiffs’ claim that the case involves “import trade or commerce” which lies outside the purview of the FTAIA. Whether objects bought or sold at the auctions came from abroad into the U.S. does not change the picture. The complaint clearly focuses on the conspiracy to fix prices. Therefore the FTAIA does apply to plaintiffs’ charges.

Defendants read the FTAIA as providing a remedy only for domestic injury caused by anticompetitive conduct directed at foreign markets. The Court disagrees. “By proposing that the FTAIA contains a broader plaintiff's injury requirement than can be supported by its text, the defendants assume that the FTAIA, which is an amendment to the Sherman Act, [Cite] determines which plaintiffs have the right to bring a private cause of action for antitrust injury caused by conduct directed at foreign markets. In doing so, they conflate the FTAIA with the Clayton Act, which is the statute that determines whether a plaintiff may bring a private cause of action for a violation of the antitrust laws based on its actual or threatened injury.” [397]

“Generally, in the antitrust context, the issue of whether a plaintiff has suffered an injury is only relevant to the Clayton Act. The Sherman Act primarily deals with defendants. It defines substantive standards that prohibit certain forms of anticompetitive conduct by defendants. The Clayton Act deals with plaintiffs. It sets forth the requirement that a plaintiff must suffer an injury or be threatened with an injury caused by a Sherman Act violation in order to bring suit. The conduct and injury requirements of the Sherman and Clayton Acts operate independently. The existence of a Sherman Act violation does not depend on whether anyone has actually suffered an injury. Conduct may violate the Sherman Act but not be actionable under section 4 of the Clayton Act because it did not cause injury.” [397-98]

“The FTAIA exempts certain forms of anticompetitive conduct directed at foreign markets from antitrust scrutiny. The text of the FTAIA clearly reveals that its focus is not on the plaintiff's injury but on the defendant's conduct, which is regulated by the Sherman Act. The FTAIA does not regulate which plaintiffs can bring suit under the Clayton Act, and it would be inappropriate to import the element of injury from the Clayton Act and graft it onto the FTAIA.” [398]

“The district court interpreted the word ‘conduct’ to mean ‘[t]he precise acts that caused injury,’ which in this case was ‘the imposition of charges for auction services at levels determined or affected by the illicit agreement.’ [Cite] But as discussed earlier, ‘conduct’ only refers to acts that are illegal under the Sherman Act. The illegal act in this case was not the imposition of high prices but the formation of the agreement to fix prices. Under the Sherman Act, such a horizontal price agreement is in itself illegal regardless of its effect or purpose.” [398-99]

The Court rejects the notion that the FTAIA changed circuit law. “We do not agree that subsection 2 of the FTAIA changed the National Bank of Canada test to require that the ‘effect’ on domestic commerce be the basis for the alleged injury suffered by a plaintiff. ... As we established earlier, a violation of the Sherman Act is not predicated on the existence of an injury to a plaintiff. In fact, the only civil action that can be brought directly under the Sherman Act is one by the federal government to enforce or prevent a substantive violation of the Sherman Act pursuant to 15 U.S.C. Section 4. Such an action can be brought regardless of whether the violation has caused injury to a plaintiff.” [399-400]

Its interpretation of the FTAIA is now applied by the Court to plaintiffs’ complaint. “If it is true, as the plaintiffs allege, that the domestic price‑fixing agreement could only have succeeded with the foreign price‑fixing agreement, then the foreign agreement certainly had an anticompetitive effect on the domestic market. The relevant ‘conduct’ in this case can be described in two ways that correspond to the two prongs of the National Bank of Canada test, both of which meet the requirements of the FTAIA. The ‘conduct’ could be an agreement to fix prices in both foreign and domestic auction markets. Such acts have an effect on domestic commerce because they include conduct directed at a domestic market. The plaintiffs allege that this ‘conduct’ actually reduced competitiveness in the domestic auction market. The domestic effect of the conduct clearly violates the Sherman Act.”

“Alternatively, the ‘conduct’ could be described as an agreement to fix prices in a foreign auction market that made possible an agreement to fix prices in the domestic auction market. The ‘effect’ of the foreign agreements, the negotiation of explicit domestic price‑fixing agreements that clearly violate section 1 of the Sherman Act, ‘gives rise to a claim’ under the Act. Therefore, the FTAIA does not shield the defendants' conduct from scrutiny under the antitrust laws.” [401]

Arguably, the Court notes, effective enforcement of our antitrust laws might be adequate if only the plaintiffs injured by the domestic anticompetitive effects were able to sue. Nevertheless, the Court tends to think otherwise. “When a foreign scheme magnifies the effect of the domestic scheme, and plaintiffs affected only by the foreign scheme have no remedy under our laws, the perpetrator of the scheme may have a greater incentive to pursue both the foreign scheme and the domestic scheme rather than the domestic scheme alone. Our markets suffer when the foreign scheme is not deterred because the domestic scheme may have a greater chance of success when it is supplemented by the foreign scheme. Our markets can benefit from the additional deterrence of conduct affecting foreign markets.” [403] In the end the Court decides only that the Sherman Act does apply to the alleged conduct forming the basis of plaintiffs’ lawsuit.

Citation: Kruman v. Christie’s International Plc, 284 F.3d 384 (2nd Cir. 2002).

CRIMINAL LAW

In case involving extraterritorial application of Maritime Drug Law Enforcement Act, Fifth Circuit decides that Due Process Clause does not require nexus between foreign citizen and United States where his vessel’s flag nation has waived any objection to U.S. enforcement

According to the charges in this case, Nestor Suerte, a Philippine citizen and resident of Colombia, was the captain of a freighter registered in Malta and owned by a member of the Colombian/Venezuelan drug trafficking organization (DTO). The ship sailed from Venezuela on August 11, 2000, with 4900 kilograms of cocaine on board intended for distribution in Europe. Venezuelan authorities intercepted the shipment and about 2700 kilograms of cocaine were lost. The DTO then telexed Suerte to make a second attempt to deliver the cocaine in international waters.

Meanwhile, the U.S. asked for and received permission from Maltese authorities to board and search the freighter. The U.S. Coast Guard search, however, did not turn up any cocaine. After receiving Malta’s waiver of objection to the enforcement of U.S. laws over the freighter and its crew, the U.S. Coast Guard towed the freighter to Houston, Texas, for a more thorough search. Customs Agents eventually found in Suerte’s cabin the DTO telex with the instructions for the second delivery attempt, as well as an attache case with $3,500 in $100 bills.

The U.S. government indicted Suerte for conspiracy to possess, with intent to distribute, more than five kilograms of cocaine on board a vessel subject to U.S. jurisdiction, in violation of the MDLEA. The relevant section of the Maritime Drug Law Enforcement Act (MDLEA) provides that “(a) It is unlawful for any person ... on board a vessel subject to the jurisdiction of the United States ... to knowingly or intentionally ... possess with intent to ... distribute [] a controlled substance ... (c)(1) For purposes of this section, a ‘vessel subject to the jurisdiction of the United States’ includes - ...(C) a vessel registered in a foreign nation where the flag nation has consented or waived objection to the enforcement of United States law by the United States.” (46 U.S.C. App. Section 1903)

Suerte moved to dismiss the indictment for lack of jurisdiction because he had no nexus to the U.S., and thus the Constitution does not permit MDLEA to have extraterritorial effect over him. After reviewing the principles of extraterritorial jurisdiction under international law, the district court decided that U. S. law does require such a nexus and dismissed the indictment. The Government appealed, arguing that a nexus did exist and, alternatively, that the Constitution does not require such a nexus.

The U.S. Court of Appeals for the Fifth Circuit vacates and remands. The Court notes that the issue raised by defendant is a matter of first impression in the Fifth Circuit and that the U.S. Supreme Court has not yet decided whether there is a nexus requirement limiting the extraterritorial reach of the MDLEA. Of the three Circuits that have addressed the issue, the Ninth Circuit has held that the Due Process Clause does require a nexus whereas the First and Third Circuits have rejected such a stricture.

The Court also notes that the opinions of the other Circuits do not refer to certain key sources of law. These included the Constitutional Convention debate surrounding the Piracies and Felonies Clause (“The Congress shall have Power ... to define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations”), and Supreme Court opinions reviewing the exercise of Congress’ powers under that Clause. These sources support the notion that Due Process does not require a U.S. nexus for the MDLEA’s extraterritorial application “where the flag nation has consented or waived objection to the enforcement of United States law by the United States” (see Section 1903(c)(1)(C)).

The 1790 Act for the Punishment of Certain Crimes Against the United States applied to crimes committed “upon the high seas.” The Supreme Court has found that there is no nexus requirement for the extraterritorial application of statutory crimes to foreign citizens on the high seas. Therefore, the Circuit Court finds it unnecessary to decide whether the Due Process Clause imposes no constraints on the extraterritorial application of the MDLEA. The Due Process Clause might conceivably set some limits or conditions on the MDLEA’s extraterritorial reach. It does not impose a nexus requirement in the instant case, however, because Congress does derive the power to act extraterritorially from the Piracies and Felonies Clause. This Clause is “the only specific grant of power to be found in the Constitution for the punishment of offenses outside the territorial limits of the United States.” (See S.Doc. No. 103-6, at 304)

Finally, the Court concludes that international law does not require such a nexus. “Malta, under whose flag Suerte’s vessel was registered, consented to the boarding and search of his vessel, as well as to the application of United States law. A flag nation’s consent to a seizure on the high seas constitutes a waiver of that nation’s rights under international law. (Cit.) ‘Interference with a ship that would otherwise be unlawful under international law is permissible if the flag state has consented’. RESTATEMENT (THIRD) OF THE FOREIGN RELATIONS LAW OF THE UNITED STATES Section 522 cmt. e (1987) ...”

“Along this line, and as noted, the MDLEA provides: ‘[A] ‘vessel subject to the jurisdiction of the United States’ includes ... vessel registered in a foreign nation where the flag nation has consented or waived objection to the enforcement of United States law by the United States’. 46 U.S.C. App. Section 1903(c)(1)(C). This codifies the generally accepted principle of international law: a flag nation may consent to another’s jurisdiction. See RESTATEMENT (THIRD), above, Section 522, reporters note 8 ... Such an agreement between the United States and a flag nation to apply United States law on a flag-nation vessel may be made informally.” [Slip op. 26-27] Enforcement of the MDLEA under these circumstances would neither be arbitrary nor fundamentally unfair.

Finally, the Court notes that Congress considers drug trafficking a serious international problem which almost every nation has condemned. The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (20 December 1988, 28 I.L.M. 493), to which both Malta and the U.S. are parties, has as one of its purposes “to promote cooperation among the Parties so that they may address more effectively the various aspects of illicit traffic in narcotic drugs and psychotropic substances having an international dimension” (see Article 2 of the Convention).

Citation: United States v. Suerte, No. 01-20626, 2002 WL 977267 (5th Cir. May 14, 2002).

JURISDICTION (SUBJECT MATTER)

District of Columbia’s highest court rules that its courts lack subject matter jurisdiction over civil actions brought against diplomats since 28 U.S.C. s. 1651 grants exclusive jurisdiction over such suits to federal courts

In February 1995, James Slater (plaintiff) and Gloria Biehl (defendant) got into a two-car accident in the District of Columbia. Biehl’s automobile bore diplomatic tags. About three years later, plaintiff sued defendant in the D. C. Superior Court claiming Biehl’s negligence caused the accident. In March 1998, defendant filed an answer to plaintiff’s complaint denying each and every allegation in it. It did not, however, challenge the court’s jurisdiction. Three months later, the Assistant chief of Protocol of the U.S. State Department issued a Certificate of Diplomatic Status with respect to defendant.

Based on the Certificate, defendant promptly moved to dismiss the case for lack of jurisdiction over her as a diplomat. After a hearing, the trial court dismissed the case for lack of subject matter jurisdiction under 28 U.S.C. s. 1351. That Section provides that “[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of all civil actions and proceedings against ‑‑ (1) consuls or vice consuls of foreign states; or (2) members of a mission or members of their families (as such terms are defined in section 2 of the Diplomatic Relations Act [22 U.S.C. Section 254a].” [emphasis added by Court].

Plaintiff appealed to the District of Columbia Court of Appeals. In affirming the lower court, that Court defines the central question for decision as whether Section 1351 refers to the subject matter jurisdiction of a state court or merely to that court’s personal jurisdiction over a diplomat. In plaintiff’s view, the statute relates only to personal jurisdiction over defendant and defendant had waived that defense by omitting to timely raise it in her first pleading. [N.B. The appellate court assumes that the District of Columbia is a “state” within the meaning of Section 1351, neither party having contended otherwise.]

Axiomatically, a court of first instance cannot act without jurisdiction over the person and the subject matter. On the one hand, personal jurisdiction is a privilege of the defendant, waived if not properly invoked. Jurisdiction of the subject matter, on the other hand, is an absolute limitation on the power of a court to decide a particular type of case and cannot be waived. The D. C. Superior Court has subject matter jurisdiction over any civil action brought in the District of Columbia unless Congress has vested exclusive jurisdiction in a federal court.

The Court finds the language of the statute plain and unambiguous. In unqualified terms, it limits the power to hear and decide civil actions against the family members of a diplomatic mission to the federal courts alone.

In speaking of the powers of the D. C. Superior Court, D.C. Code s. 11-921 (2001) (b) states the corollary principle that “The Superior Court does not have jurisdiction over any civil action or other matter (1) over which exclusive jurisdiction is vested in a Federal court.”

One notable exception pointed out by the Court is that of domestic relations law over which the federal courts do not otherwise have statutory jurisdiction. See Ohio ex rel. Popovici v. Agler, 280 U.S. 379, 382‑383 (1930) (provisions granting federal district courts original jurisdiction, exclusive of courts of several states, over all suits against consuls and vice‑consuls, should not be construed as granting to District Court or denying to state courts, jurisdiction over suits for divorce and alimony).

As the State Department’s Certificate of Diplomatic Status declared, defendant is the wife of the Chilean Ambassador to the United States. “Courts generally accept as conclusive the views of the State Department as to the fact of diplomatic status. [Cite] Under 22 U.S.C. Section 254 a(2), which is specifically referenced in § 1351, the term ‘family’ means ‘the members of the family of a member of a mission ... who form part of his or her household if they are not nationals of the United States ... within the meaning of Article 37 of the Vienna Convention.’”

“Article 37 of the Vienna Convention on Diplomatic Relations provides that "[t]he members of the family of a diplomatic agent forming part of his household shall, if they are not nationals of the receiving state, enjoy the privileges and immunities specified...." Vienna Convention on Diplomatic Relations, April 18, 1961, art. 37(1), 23 U.S.T. 3227, 3244, 500 U.N.T.S. 96, 116 ("Vienna Convention") (entered into force with respect to the United States on December 13, 1972). ‘A 'diplomatic agent' is the head of the mission or a member of the diplomatic staff of the mission.’ Id., art. 1(e), 23 U.S.T. at 3231, 500 U.N.T.S. at 98. Heads of mission are divided into three classes, and include ambassadors. Id., art. 14(1)(a), 23 U.S.T. at 3235, 500 U.N.T.S. at 104.” [1272-73] Her failure to challenge subject matter jurisdiction at first instance is immaterial.

In 1875, a codifier left out the predecessor of Section 1351 without explanation, thus allowing state courts to exercise concurrent jurisdiction over cases against consuls. “Exclusive federal jurisdiction over cases against consuls was reinstated in 1911, [Cites] in order to ‘correct[] a mistake of omission on the part of Congress on the occasion of the former [1875] revision.’ 46 Cong. Rec. 1538 (1911) (statement of Sen. Heyburn); [Cite]. In 1948, Title 28 of the United States Code, including Section 1351, was enacted. [Cite] At that time, 28 U.S.C. Section 1351 provided that ‘[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of any civil action against consuls or vice consuls of foreign states.’ Congress amended Section 1351 in 1978 to include ‘members of a mission or members of their families (as such terms are defined in section 2 of the Diplomatic Relations Act).’ See Pub.L. No. 95‑ 393, 92 Stat. 810 (1978). The foregoing history, including the span of thirty‑six years during which state and federal courts did have concurrent subject matter jurisdiction over cases against consuls, belies any argument that Section 1351 refers to personal jurisdiction.” [1373]

In addition, plaintiff’s arguments based on cases involving diplomatic immunity are inapposite. First, a court must have subject matter jurisdiction over the suit against a diplomat to empower it to decide whether or not immunity applies. Secondly, unlike subject matter jurisdiction, diplomatic immunity is waivable but only by the state or government the defendant represents.

Citation: Slater v. Biehl, 793 A.2d 1268 (D. C. Ct. App. 2002).

SOVEREIGN IMMUNITY

Approving the rationales of two English cases on corporate succession, Sixth Circuit rules that Communist predecessor corporation’s waiver of sovereign immunity bound present Romanian Government’s reinsurance entity

General Star National Insurance Company (General Star), an Ohio corporation, concluded five re-insurance contracts with Administratia Asigurarilor de Stat (ADAS), the Government-owned provider of all insurance services in Romania, between 1974 and 1981. ADAS was to cover part of General Star’s potential losses under certain insurance policies in exchange for a portion of the premiums General Star received. The Romanian Government dissolved ADAS in 1991 when Communist rule ended, and replaced it with three new entities, Astra, S.A. (Astra), Carom, S.A. (Carom), and Asigurarea Romaneasca (Asirom).

After running into difficulties in recovering insurance payments allegedly due, General Star sued Astra, Carom and Asirom in U.S. district court in the Fall of 1998 for breach of contract and unjust enrichment. The action sought $922,107 in past due payments and $1,618,994 in additional expenses. General Star had faxed a copy of the complaint and summons to Astra. It also had delivered them to the New York law firm of Mendes and Mount, which the re-insurance contracts had designated as ADAS’ agent for receiving service. Astra, however, failed to respond to the complaint.

After defendants failed to appear and defend, the district court entered a default judgment against them on March 17, 1999. Almost one year later, the defendants moved to vacate the judgment as void for lack of subject matter jurisdiction and improper service of process. The district court agreed that the judgment was void as to Carom and Asirom, because they were not ADAS’ successors for purposes of the re-insurance contracts. It, however, denied Astra’s motion to vacate the default judgment. Astra appealed.

The U.S. Court of Appeals for the Sixth Circuit affirms. The Court essentially concludes that Astra was the successor-in-interest to its Communist predecessor, and it was thus bound by the Communist entity’s surrender of sovereign immunity under 28 U.S.C. Sections 1605(a)(1)&(2).

The Court first addresses the district court’s subject matter jurisdiction. The district court had based it on 28 U.S.C. Section 1330(a) [district court jurisdiction over foreign state where state not entitled to sovereign immunity], and found Astra not immune under Sections 1605(a)(1)&(2). Section 1605(a)(1) provides that a foreign state is not entitled to sovereign immunity if, either expressly or implicitly, it waives that immunity. Here, the district court found that ADAS had implicitly waived its immunity when it agreed in the re-insurance contracts “to submit to the jurisdiction of any court of competent jurisdiction of the United States.” That implicit waiver of sovereign immunity binds Astra as ADAS’ successor-in-interest.

Section 1605(a)(2) strips a foreign state of sovereign immunity in actions that are “based upon a commercial activity carried on in the United States by the foreign state ...” The district court found that the reinsurance contracts between General Star and ADAS were commercial transactions within the U.S.

Astra also argued that it is not an instrumentality of the same state as ADAS, because ADAS was an entity of Communist Romania while the democratic government of Romania created Astra. Without citing persuasive authority, Astra claimed that Romanian law applies to this issue, while General Star argued that international law controls.

The Court agrees with plaintiff. Although the Romanian courts have not yet decided whether Astra is ADAS’ successor-in-interest, this does not bar the Court of Appeals from resolving the successorship issue. “Astra claims that it is not a successor-in-interest to ADAS, but offers no analysis of the issue under Romanian law. General Star, on the other hand, urges us to rely upon two judicial decisions from the United Kingdom where the court applied Romanian law in assessing the relationship between Astra and ADAS. .... [In one case], the High Court of Justice determined that, pursuant to Romanian law, Astra is the successor-in-interest to ADAS with regard to the latter’s reinsurance liabilities. To reach this conclusion, the court relied upon the opinion of a Romanian legal expert pertaining to the proper meaning of the government decree that transferred ADAS’s reinsurance interests to Astra ...”

“The High Court of Justice reached the same conclusion in [the other case]. In that case, Astra again contended that it is not a full successor-in-interest to ADAS, but rather assumed only ‘lei 3,500 million’ of ADAS’s liabilities. The court rejected this position, pointing out the absence of any evidence indicating that the Romanian government intended to cancel or limit ADAS’s liabilities in transferring its reinsurance operations to Astra.” [Slip op. 8-10] The Court notes that both English cases are currently on appeal, but nevertheless considers the analysis compelling. Under U.S. law, the courts generally consider a judgment binding until set aside on appeal. Astra cites no authority showing that English law is to the contrary.

Finally, the Court rejects Astra’s argument that plaintiff did not properly serve it with process. Under 28 U.S.C. Section 1608(b)(1), a plaintiff may serve process upon a foreign state by delivering the summons and complaint in accordance with any special arrangement for service between the plaintiff and the agency or instrumentality. Here, in each reinsurance agreement, ADAS had consented to service through its New York lawyers.

Citation: General Star Nat’l Ins. Co. v. Administratia Asigurarilor de Stat, No. 01-3002, 2002 WL 857239 (6th Cir. May 7, 2002).

TRADEMARKS

In case brought by member of U.S. pharmaceutical group, European Court of Justice rules that, where parallel importer can show strong professional and customer resistance to drugs in relabeled original packages, this may constitute enough denial of effective access to second market as to justify repackaging by importer

In November 1999, the Oberlandesgericht Wien (Higher Regional Court, Vienna) referred to the European Court of Justice a request for a preliminary ruling on EU law under Article 234 EC. It dealt with the interpretation of Article 7(2) of First Council Directive 89/104/EEC of December 21, 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1), as amended by the Agreement on the European Economic Area of 2 May 1992. (OJ 1994 L 1, p. 3)(the Directive).

The plaintiff in the Member State proceedings was Sharp & Dohme GmbH (Merck), an Austrian company forming part of the pharmaceutical group Merck & Co., Inc. (the Merck group), a United States establishment. The defending party was Paranova Pharmazeutika Handels GmbH (Paranova), a Danish company engaged in buying pharmaceutical products in a Member State where the price was lower and reselling it in a State where they brought a better price. In this case, Paranova was buying Proscar, a trademark of Merck, in Spain and marketing it in Austria. The product treats benign prostatic hyperplasia (BPH). Rather than placing stickers over the original package, Paranova repackaged the medication with instructions in German as to its proper use and with due recognition of Merck’s trademark on it.

By an October 1997 letter to Paranova, the Austrian authorities, citing Community case‑law, noted that the appearance of pharmaceutical products was of great importance to make it more likely that patients will comply with their treatment, and that over-stickering of the package might put this in jeopardy. In November 1997, the Austrian authorities allowed Paranova to place Proscar on the Austrian market which it had imported in parallel from Spain. After Paranova notified Merck of its plans the following year and sent along a sample of its new packaging, Merck objected that this would unlawfully impair its trade mark rights.

Paranova replied, pointing out that Austrian Law required certain key information on the package to be in German. It noted the Austrian government’s recommendation of repackaging and argued that attaching labels tended to impair sales since both pharmacists and consumers tended to mistrust products in relabelled foreign packs.

At Merck’s request, the Vienna Commercial Court ordered Paranova to cease and desist on the theory that placing stickers on all six sides of the original box would not thwart the marketing of the product in Austria. Paranova then appealed to the referring court in September 1999.

“By its question, the national court seeks essentially to ascertain whether a trade mark proprietor may oppose the repackaging, by a parallel importer and without its authorisation, of a pharmaceutical product bearing that trade mark on the ground that the repackaging is not necessary for the product to be able to be marketed in the importing State even if, without such repackaging, the marketability of the product would be jeopardised solely because a significant proportion of the consumers in that State is suspicious of pharmaceutical products clearly intended for the market of another State.” [para. 16]

The ECJ first points out that a trade mark proprietor’s objection to the repackaging by a parallel importer which has complied with notice and other requirements is not warranted if it impedes effective access of the imported product to the market of the importing State. “Such an impediment exists, for example, where pharmaceutical products purchased by the parallel importer cannot be placed on the market in the Member State of importation in their original packaging [1] by reason of national rules or practices relating to packaging, or [2] where sickness insurance rules make reimbursement of medical expenses depend on a certain packaging or [3] where well‑established medical prescription practices are based, inter alia, on standard sizes recommended by professional groups and sickness insurance institutions. In that regard, it is sufficient for there to be an impediment in respect of one type of packaging used by the trade mark proprietor in the Member State of importation.” [para. 26]

In the Court’s view, market resistance to relabeled products does not always mount such an obstacle to effective market access as to demand replacement packaging. “However, there may exist on a market, or on a substantial part of it, such strong resistance from a significant proportion of consumers to relabelled pharmaceutical products that there must be held to be a hindrance to effective market access. In those circumstances, repackaging of the pharmaceutical products would not be explicable solely by the attempt to secure a commercial advantage. The purpose would be to achieve effective market access. It is for the national court to determine whether that is the case.” [paras. 31, 32]

Citation: Merck, Sharp & Dohme GmbH v. Paranova Pharmazeutika Handels GmbH, Case C‑443/99 (Eur. Ct. Just. April 23, 2002).

EU amends manual for Regulation on service of judicial and extrajudicial documents. With Commission Decision 2002/350/EC, the EU Commission has amended the Manual of Receiving Agencies and a glossary of documents that may be served under Regulation 1348/2000 on the service of judicial and extrajudicial documents in “civil or commercial” matters. The changes to the manual and related procedures cover more than 800 pages. Citation: 2002 O.J. of the European Communities (L 125) 1, 13 May 2002.

Japanese Supreme Court rejects citizen suit over U.S. Air Force noise pollution. In April 1996, a group of persons who live near the Yokota U.S. Air Force Base in western Tokyo sued the U.S., asking for about 3.3 billion yen in damages plus a court order enjoining night and early morning flights by U.S. military aircraft. When the U. S. declined to respond to the suit, the Tokyo District Court dismissed the claims against it. The Court relied on a 1928 decision of its predecessor court, holding that Japanese jurisdiction does not attach if a foreign government does not respond to the suit. The Tokyo High Court affirmed in 1998. The High Court additionally relied upon the Japan-U. S. Status of Forces Agreement [T.I.A.S. 12693, April, 1996 (semble)] as providing that Japanese jurisdiction does not apply to the U.S. when someone sues it for damages over alleged wrongdoing by U.S. armed forces in Japan. On April 12, the Japanese Supreme Court dismissed plaintiffs’ appeal. Although this was reportedly the first lawsuit of its kind, the Court did not hold oral hearings. It did suggest that customary international law exempts sovereign acts from civil jurisdiction although probably not private acts. In the Court’s view, night flights by U.S. military planes constitute a sovereign act by the U.S. government. Citation: Newsletter, 2002 Gale Group, Inc., (April 15), reprinting 2002 Kyodo News International, Inc., Japan Policy & Politics, April 12, 2002.

EU updates antiterrorism measures. The European Union, by action of the Council, has updated its measures against terrorism. With Council Common Positions 2002/340/CFSP and 2002/927/EC, the Council has amended the list of designated terrorist organizations and individuals. Among the listed organizations are Aum Shinrikyo, Hamas-Izz al-Din, the Palestinian Islamic Jihad, and the Shining Path. Citation: 2002 O.J. of the European Communities (L 116) 33, 75, May 3, 2002.

U.S. signs trade-related agreement with West African Economic Monetary Union. On April 24, 2002, the U.S. signed a “Trade and Investment Framework Agreement” (TIFA) with a regional organization of eight West African nations, the West African Economic Monetary Union (WAEMU). The WAEMU members have established a customs union and lifted tariffs on intra-WAEMU trade. The members are Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Deputy U.S. Trade Representative Jon Huntsman signed the agreement on behalf of the U.S. The TIFA will establish a joint Council on Trade and Investment, consisting of representatives of the U.S. Government and the WAEMU Commission, which will negotiate further agreements and address intellectual property issues. Citation: U.S. Trade Representative press release 02-46 (April 24, 2002).

EU extends Burma/Myanmar sanctions. Based on findings that there has been insufficient progress regarding the human rights situation in Burma/Myanmar, the EU Council has extended the sanctions of Common Position 96/635/CFSP of October 28, 1996, for another six months. Citation: 2002 O.J. of the European Communities (L 107) 1, 24 April 2002.

EU Commission specifies “Conformity Assessment Bodies” and Joint Committee rules for U.S.-EU agreement on mutual recognition of technical specifications. The EU Commission has published eight Decisions with specifications for an Agreement on Mutual Recognition between the European Community and the United States of America. For example, Decision 8/2001 lists one additional electromagnetic compatibility EC Conformity Assessment Body (EMI-EMC) to the ones already listed in a previous Decision, and adds one US Conformity Assessment Body (TUV Product Service). It also removes two electromagnetic compatibility Conformity Assessment Bodies. Decision 9/2001 removes two telecommunications Conformity Assessment Bodies. Decision 10/2001 adds four telecommunications EC Conformity Assessment Bodies, and five electromagnetic compatibility Conformity Assessment Bodies. Decision 14/2001 sets forth the Rules of Procedure for the U.S.-EU Joint Committee established under the Mutual Recognition Agreement. The Rules specify, for example, that the Joint Committee shall meet at least once a year, that the parties shall take turns in hosting it, and that decisions shall be taken by unanimous consent. Citation: Decision Nos. 8-2001 - 15/2001, 2002 O.J. of European Communities (L 101) 19-37, 17 April 2002.

U.S. and EU agree on Guidelines for regulatory cooperation. On April 12, 2002, the U.S. and the European Commission announced their agreement on guidelines for regulatory cooperation and improved access to each other’s regulatory processes. The “Guidelines on Regulatory Cooperation and Transparency” had been under negotiation since 1999 under the Transatlantic Economic Partnership (TEP), the 1998 initiative to improve transatlantic trade. The Guidelines set forth specific cooperative steps, such as bilateral consultations in regulatory matters and regulatory information exchange. The Guidelines are available on the website of the U.S. Trade Representative “www.ustr.gov,” and the website of the European Commission “europa.eu.int”. Citation: U.S. Trade Representative press release 02-42 (April 12, 2002).

U.S. Department of State certifies 41 countries for turtle-safe shrimp harvesting. On April 29, the U.S. Department of State certified 41 countries and one economy as meeting the requirements of Section 609 of Pub.L. 101-162 for turtle-safe shrimp harvesting methods. Section 609 prohibits the importation of shrimp and shrimp products that were harvested in a manner that adversely affects sea turtle species. The chief component of such required harvesting methods are sea “turtle excluder devices” (TEDs) that prevent the accidental drowning of sea turtles in shrimp trawls. Citation: U.S. Department of State Media Note (April 30, 2002).

U.S. Trade Representative publishes 2002 Review of Telecom Agreements. The U.S. Trade Representative (USTR) has published its 2002 Review of Telecom Trade Agreements (“Section 1377" review). This Report highlights the USTR’s telecommunications enforcement priorities for the coming year. It is based on public comments by U.S. industry and other private parties, and reports of U.S. government agencies and U.S. trading partners. This year, the Report highlights compliance concerns in the European Union, Japan, Mexico and Switzerland. The current priorities are (1) mobile wireless interconnection rates in EU Member States and Japan, (2) provisioning and pricing of leased telecom lines in EU Member States and Japan, and (3) interconnection and other competition concerns in Mexico. The USTR annually reviews the operation of U.S. telecommunications trade agreements pursuant to Section 1377 of the Omnibus Trade and Competitiveness Act of 1988. The Report is available on the website of the USTR at “www.ustr.gov”. Citation: U.S. Trade Representative press release 02-39 (April 3, 2002).