Legal Analyses written by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.

Legal Analyses written by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.

2001 International Law Update, Volume 7, Number 2 (February).

ECONOMIC SANCTIONS

U.S. President Clinton again suspends lawsuit provisions of LIBERTAD Act for another six months period

On January 16, 2001, shortly before leaving office, U.S. President Bill Clinton suspended for an additional six months the lawsuit provision in Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (Public Law No. 104-114). The President certified that a continued suspension is necessary to protect the national interest and to expedite the transition to democracy in Cuba.

Title III of the Act allows U.S. parties with claims to confiscated property in Cuba to file suits in U.S. courts. Though Title III entered into force on August 1, 1996, the President immediately suspended the law suit provision to permit a multilateral approach to promote democracy and human rights in Cuba. Each time the President continued the suspension of that provision, he referred to the international efforts and the pressure exerted by other countries on Cuba.

The ongoing suspension, from February 1, through July 31, 2001, will permit international efforts to continue. A Press Statement and accompanying Fact Sheet issued by the Department of State describe the various efforts and initiatives of the international community to promote democracy in Cuba.

The Fact Sheet notes, for example, (1) that Canada would invite only “democracies” to the 2001 Summit of the Americas in Quebec City; (2) that friction developed at the Ibero-American Summit in Panama November 17-18, 2000, because only Cuba refused to sign a statement condemning ETA terrorists in Spain; and (3) that international NGOs continue to support dissidents in Cuba. For example, Human Rights Watch produced an end-of-year human rights report that lists Cuba as one of the world’s worst human rights violators.

In a related matter, the U.S. International Trade Commission (ITC) has released a report on The Economic Impact of U.S. Sanctions with Respect to Cuba (USITC Publication No. 3398, February 2001). The report is available on the ITC website “www.usitc.gov”. It analyzes the impact of U.S. sanctions on specific economic sectors of Cuba, concluding that the sanctions affect the U.S. and Cuban economies only minimally. The report also notes that some U.S. industries may benefit from the removal of these sanctions.

Citation: U.S. Department of State Press Statement of Jan.17, 2001, and accompanying fact sheet; The White House, Transmittal Letter Concerning  Report of Title III of Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (January 16, 2001); U.S. International Trade Commission News Release 01-025 (Feb. 16, 2001).

EXTRADITION

Supreme Court of Canada rules that, when Canadian government granted extradition to United States of two Canadian youths to be tried for triple murders without obtaining assurances that Washington state would not impose death penalty, it contravened the Canadian Charter of Rights and Liberties

The State of Washington is anxious to extradite Glen Sebastian Burns and Atif Ahmad Rafay (respondents) from Canada for trial on three counts of aggravated first degree murder. Convictions will entail either the death penalty or life in prison without the possibility of parole.

The respondents are both Canadian citizens and were 18 years old when, in July 1944,  police found Rafay’s father, mother and sister beaten to death in their home in Bellevue, Washington. Respondents, who had been high school friends in British Columbia,  conceded that they had been at the Rafay home on the night of the murders.

According to their story, however, they had gone out and had come back later to discover the bodies. Respondents then fled to Canada where undercover R.C.M.P. officers later arrested them in British Columbia. The Attorney General of that province determined not to prosecute respondents there.

U.S. authorities began proceedings to extradite respondents for trial in Washington. After assessing respondents’ circumstances, the Canadian Minister of Justice decreed their extradition without asking for assurances pursuant to Article 6 of the United States-Canada Extradition Treaty, 27 U.S.T. 983, T.I.A.S. 8237 (1976) that Washington authorities would neither impose nor carry out the death penalty.

Respondents then took their case to the B. C. Court of Appeal. In a majority ruling, the Court held that this unconditional extradition order would infringe respondents’ mobility rights under Section 6(1) of the Canadian Charter of Rights and Freedoms. Upon the Minister’s further appeal, the Supreme Court of Canada dismisses.

The Court first notes that the Minister has a degree of discretion as to whether to seek assurances but that the Charter sets limits to that discretion. Death penalty cases are intertwined with constitutional values and the Court is the “guardian of the Constitution.”

This case actually poses a justice issue and only obliquely a mobility matter. Nor is Section 12  of the Charter barring cruel and unusual treatment or punishment directly applicable. Taking into account other constitutional values, Section 7's guarantee of “fundamental justice” with its balance analysis is controlling. After all, granting the extradition request here would appear to rob respondents of their rights of liberty and personal security by putting their lives at risk. To extradite Canadian citizens under circumstances that breach fundamental justice would be enough to “shock the conscience.”

The government argued, however, that four factors favored extradition without assurances. The first is that respondents should have to stand trial to determine their guilt or innocence. Secondly, the trial should take place in the jurisdiction where the alleged crimes occurred. Thirdly, the respondents should accept the laws and procedures of the criminal situs. Finally, comity to the U.S. warrants Canadian mutual assistance in furnishing a fair U.S. trial to the accused.

On the other hand, the Court refers to some countervailing factors that support extradition only with assurances. In the first place, Canada has abolished the death penalty because of its irreversibility and because of doubts as to its fair administration and as to its deterrent value. Secondly, most other nations have done away with the death penalty based on concerns similar to those that underlay Canada’s internal policy. Comparable nations also favor assurances if asked to extradite an accused to the U.S. when capital punishment is a possibility.

Third, the relative youth of the respondents provides a limited mitigating circumstance. Fourth, recent disclosures in both Canada and the U.S. of wrongful murder convictions remind us that legal systems sometimes fail, even in the face of elaborate safeguards. Finally, the horrors of the interminable “death row phenomenon” is a relevant though not a controlling consideration.

In balancing these elements, the Court also points out that the United States-Canada Extradition Treaty expressly provides for a discretion to ask for assurances. While the Minister’s concern that Canada not turn into a “safe haven” for violent fugitives is not inappropriate, the evidence does not support the notion that the death penalty is more efficacious in this respect than life in prison.

“The outcome of this appeal turns on an appreciation of the principles of fundamental justice, which in turn are derived from the basic tenets of our legal system. These basic tenets have not changed since 1991..., but their application in particular cases (the ‘balancing process’) must take note of factual developments in Canada and in relevant foreign jurisdictions. When principles of fundamental justice as established and understood in Canada are applied to these factual developments, many of which are of far‑reaching importance in death penalty cases, a balance which tilted in favour of extradition without assurances in [two 1991 cases] now tilts against the constitutionality of such an outcome. For these reasons, the appeal is dismissed.” [para. 144]

Citation: United States v. Burns, 2001 S.C.C. 7 (Can. Sup. Ct. Feb. 15).

FORUM NON CONVENIENS

In English suit involving two insurance companies subject to Brussels-Lugano Conventions, Court of Appeal rules that application of forum non conveniens doctrine in favor of Texas courts was not inconsistent with either Convention or with waiver clause in reinsurance contract

A fronting insurance company called Sol Insurance Ltd (Sol) wrote a policy for Nabors Industries Inc. (Nabors), a Texas corporation. The policy covered the insured for physical damage to its oil drilling operations and for business interruption worldwide. Sol reinsured with Zurich Insurance Company (ZIC), a Swiss company.

The policy contained a Texas jurisdiction clause under which ZIC and Sol waived any objection to having the state or federal courts of Texas decide disputes under the contract on the ground of improper venue or forum non conveniens. Another clause voided the policy upon its assignment without the Underwriters’ prior written consent. Finally, both original insured and reinsured had a duty to provide prompt written notice to ZIC of any covered claims and to cooperate with ZIC in handling them.

In September 1999, Ace Insurance SA-NV of Belgium sued ZIC in the English courts for a declaration of non-liability under the contract of reinsurance made with ZIC. Ace later found out that ZIC has assigned all of the contract rights and liabilities of its U.S. branch to the newly formed New York corporation, Zurich American Insurance Company (ZAIC), under a Domestication Agreement. As a result, Ace joined ZAIC as second defendant.

The reinsurance contract had a “service of suit clause” which read in part as follows. “It is agreed that in the event of the failure of the Underwriters hereon to pay any amount claimed to be due hereunder, the Underwriters hereon, at the request of the Insured (or Reinsured), will submit to the Jurisdiction of a Court of competent jurisdiction within the United States.”

On May 26, 1998, Nadrico Saudi Ltd. (Nadrico), one of Nabors’ associated companies, had one of its wells “blow out” in Saudi Arabia while workers were installing a blow out preventer (BOP). ZIC arguably gave Ace no immediate written notice of Nabors’ claim but went ahead and paid more than $12,000,000 to satisfy Nadrico’s claims.

In the present action, Ace contested the claim based on breaches of the co-operation clause and the BOP warranty which it argued were incorporated into its contract. Seeking indemnity under the reinsurance contract, ZIC and ZAIC invoked the service clause and sued Ace in the Texas state courts. Both defendants moved in June 2000 to have the English proceedings stayed under the forum non conveniens doctrine in favor of adjudication in the Texas courts.

The court of first instance granted defendants’ motion. He held that the court had power to stay a claim based on forum non conveniens against ZIC, a domiciliary of a contracting state under Brussels-Lugano Conventions, even though the stayed action was pending in the U.K., a state also governed by one of those Conventions.

[Editors’ Note: the Brussels Convention on Jurisdiction and Judgments of 1968, as amended, applies only among the fifteen Member States of the EU. The similar and interlocking provisions of the Lugano Convention on the same subjects apply to those other European states that belonged to the European Free Trade Area (EFTA) or the European Economic Area (EEA). ZIC is domiciled in Switzerland, a member of the latter group of states.]

Ace sought appellate review. The English Court of Appeal (Civil Division), however, dismisses the appeal. It limns the issue as follows: “The crucial question in the present case is whether the English court can stay, strike out or dismiss proceedings on the ground of forum non conveniens, where the defendant in the English proceedings is domiciled in England, but the conflict of jurisdiction is between the jurisdiction of the English court and the jurisdiction of the courts of a state which is not a contracting state, no other contracting state being involved.” [para. 21]

The Court preliminarily notes that ZIC has contingently submitted to the jurisdiction of the English court, i.e., subject to its right to argue against the application to it of the  forum non conveniens doctrine. Section 49 of the Civil Jurisdiction and Judgments Act of 1982, as amended by the 1991 Act, authorizes the English courts to invoke the forum non conveniens doctrine where it conflicts with neither the Brussels nor the Lugano Conventions.

After a careful analysis of the prior precedents, the Court of Appeal concludes that the staying of these proceedings against ZIC would not be at war with the Lugano Convention. “[T]he states which were parties to the Convention had no interest in requiring a contracting state to exercise a jurisdiction where the competing jurisdiction was in a non‑contracting state. The contracting states were setting up an intra‑Convention mandatory system of jurisdiction. They were not regulating relations with non‑contracting states.” [para. 27]

Plaintiff lay great stress on the supposed dominance of English law under the contract. “In the circumstances, I do not see how condition 24 [no assignment without prior written consent] is of much assistance to [plaintiff] for the purposes of [its] submission that English law has a qualitatively superior significance in this litigation. Even if the condition is incorporated, and even if it is to be given a construction different from and wider than New York law would give it or Texan law or a Texan court would recognise, it would be impossible to avoid looking to New York law both for the effect of the transfer and for the issue of rectification. ... [I]t would [also] be impossible at trial in England to avoid looking to evidence of New York law for the whole gamut of submission relevant to the condition.” [para. 54]

Nor does plaintiff’s reliance on condition 36 [prompt written notice of claims] elevate the  significance of English law in this case, especially since the existence of prejudice to Ace  is far from indisputable. “[Plaintiff has] left me utterly unconvinced that English law has a qualitatively more significant role to play than Texan and/or New York law, or that the judge was wrong to find that the fact that the proper law of the reinsurance contract might be English is not of any significant weight in concluding where the case is to be tried.” [para. 57]

The lower court had given decisive weight to the service of suit clause but plaintiff sought to neutralize its effect. The Court of Appeal rejects plaintiff’s contention that, by contingently submitting to the jurisdiction of the English court after the filing of the Texas lawsuit, ZIC had waived its right to enforce the clause. Nor was plaintiff persuasive when it argued that the submission to English jurisdiction shifted the onus to ZIC to justify a stay, rather than on the reinsurer to justify service out. Finally, plaintiff makes an unsuccessful effort to play down the decisiveness of the service clause by pointing to the obvious convenience of trying the substantive issues in England. It lies ill in Ace’s mouth, however, to complain of the exercise of a jurisdiction to which it had consented by signing on to the clause.

Nor do Ace’s actions in Texas, in the Court’s view, suggest that it regarded the Texas courts as lacking jurisdiction over the dispute. After all, it had removed the case to a federal court in that state and (albeit unsuccessfully) had resisted plaintiff’s motion to remand to the state court.

Citation: Ace Insurance SA-NV (formerly Cigna Ins. Co. of Europe SA-NV) v. Zurich Insurance Co., [2001] E.W.C.A. Civ. 173 (Ct. App. Civ. Div. February 2)(Transcript Smith Bernal).

INTERNET

Two German courts find acquisition of internet domains using names of unrelated companies improper since profit is sole motive

Two German court opinions have addressed the phenomenon where individuals purchase internet domain names of companies, such as www.acme.com, to later sell them to the company at a high price. Similar purchases had occurred even before the internet when individuals registered the trade names of well known companies. For example, before the “Hard Rock Cafe” opened in Buenos Aires, Argentina, a women allegedly had already registered the trade name as her’s, which resulted in a court action over the use of the name. See New York Times, December 14, 1995, page D6. Two recently published German court opinions have held that the acquisition of website domains using the names of companies that are unrelated to the buyer is improper.

In August 2000, the State Supreme Court in Frankfurt/Main held that a German court may enjoin a person who, without any relationship or interest, registers an internet domain name with the trade name of a company. The court may also award damages for such vexatious and immoral (sittenwidrig) conduct (see Sections 826 and 226 of the Civil Code, (Bundesgesetzbuch, BGB)). The case involved a dairy by the name of “Weideglueck” (“meadow fortune”) whose trade name the dairy had registered in 1979. The defendant registered an internet domain by the same name in Spring 1999. The plaintiff did not offer any products or services involving that name, and simply prevented the diary from maintaining a website under its trade name in Germany.

The Court explains: “One can assume an immoral interference and intent to harm when the domain registration occurs with the goal of preventing the trade mark owner from using the name for its own business purposes. This usually goes along with the intent to have the trade mark owner purchase the domain at a high price. Someone who seeks to exploit with the intent of reaping financial gains the important usage interest of a trade mark owner violates moral standards of all people with a sense of justice.” [Slip op. 2]

The Court rejects the defendant’s explanation that his hiking tours in the mountains of Austria inspired him to register the domain name. Based on the facts of the case, the Court finds that profit motives drove the defendant. That is, he simply wanted to sell the domain name at a high price to the owner of the trade name.

Similarly, in April 2000, the District Court Wiesbaden held that the owner of a trade name is entitled to an injunction against someone without relationship to that trade name who has bought the domain name and does not use it. In this case, the defendant had registered the trade name of a computer research laboratory at the University of Karlsruhe in his name, and later demanded German Marks 30,000 (approximately $15,000) to release the domain. The defendant does not have any link with that organization and did not put the domain name to any use.

The Court notes that there is agreement among German state supreme courts that the rightful owner of a trade name can seek an injunction and damages against someone who registered the same name as an internet domain. In assessing court costs, the court based its calculation on the amount which the defendant had demanded from the research laboratory, i.e., German Marks 30,000.

Citation: OLG Frankfurt/Main, Beschluss vom 12. April 2000, 6 W 33/00 - weideglueck.de; Landgericht Wiesbaden, Beschluss vom 9. August 2000, 3 O 129/00 - “z.de”.

JUDGMENTS

EU issues regulation on jurisdiction and on recognition and enforcement of judgments in civil and commercial matters which supersedes Brussels Convention among EU Member States

The European Union has issued Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters. The Regulation unifies EU rules on the recognition of judgments and is based on the rules provided by the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, as amended. [Note: A “Regulation” in the EU is directly applicable to the Member States, no national implementation is required as would be the case for a “Directive.”] Entering into force on March 1, 2002, the Regulation expressly does not apply to litigation over the status or legal capacity of natural persons, property rights arising out of marriage, wills and succession, as well as bankruptcy, social security and arbitration matters. (Article 1).

Some of the key provisions are as follows. A plaintiff may sue a defendant regardless of his or her nationality in the country of defendant’s domicile. (Article 2) The Regulation, however, provides for “special jurisdiction for matters such as the sale of goods and provision of services,” where jurisdiction may be had at the place of performance. (Article 5) In addition, the Regulation has different sections for insurance matters, consumer contracts, and employment contracts (Sections 3-5). Member State courts may deny recognition of a judgment where such recognition would be contrary to the public policy of the forum state. (Article 34) A forum court, however, is not to review a foreign judgment on the merits. (Article 36)

Finally, the Regulation contains a separate Section on its interaction with other conventions and agreements. For example, it will supersede the Brussels Convention as between the EU Member States, and specified bilateral conventions in this area. (Chapter VII). Note that the Regulation excludes Denmark because the Brussels Convention remains in force between Denmark and other EU Member States.

The Annexes list the EU Member State national rules of jurisdiction (Annex I), and the national courts or competent authorities for recognition and enforcement matters (Annexes II, III & IV). They also set forth a sample court certificate which the enforcing party has to present to secure recognition and enforcement in another Member State court (Annex V), and a sample authentication certificate (Annex VI).

Citation: Council Regulation No. 44/2001, 2001 O.J. of European Communities (L 12) 1, 16 January 2001.

JURISDICTION (SUBJECT MATTER)

In action by Norwegian oil drilling company against service providers in North Sea, Fifth Circuit concludes that Sherman Act and FTAIA did not apply to foreign conduct because domestic effect of anticompetitive conduct did not “give rise” to antitrust claim

Den Norske Stats Oljeselskap AS (Statoil) is a Norwegian oil company that owns oil and gas drilling platforms and conducts business solely in the North Sea. In December 1998, it brought an action under U.S. antitrust laws against Heeremac Vof and others. These companies are among the handful of heavy-lift barge companies in the world which can hoist and transport off-shore drilling platforms.

Statoil alleged that defendants agreed to fix bids and allocate customers, territories, and projects between 1993 and 1997. As a result of  this conspiracy, Statoil had to charge higher prices for crude oil exports to the U.S., and companies paid higher prices for heavy-lift services in the Gulf of Mexico. In December 1997, the U.S. Department of Justice had filed a criminal complaint against HeereMac who had pled guilty and paid fines of $49 million. Many companies later filed civil suits in the U.S. courts seeking redress.

The district court found that defendants’ activities had little or no effect on U.S. domestic commerce, and dismissed Statoil’s case for lack of subject matter jurisdiction. Statoil appealed. A majority of the U.S. Court of Appeals for the Fifth Circuit affirms.

The Sherman Act prohibits conduct that constitutes an unreasonable restraint of trade. See 15 U.S.C. Section 1. American antitrust laws, however, do not apply to non-import commerce with foreign nations unless the activity at issue has a “direct, substantial, and reasonably foreseeable effect” on domestic commerce and “such effects gives[sic] rise to a claim under” the antitrust laws. See the 1982 Foreign Trade and Antitrust Improvements Act (FTAIA) (15 U.S.C. Section 6(a)).

The Court notes that U.S. antitrust laws do not regulate the competitive conditions of other nations’ economies, citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 582 (1986). The Court agrees with Statoil that the defendants’ alleged anti-competitive conduct had a direct, substantial and reasonably foreseeable effect on the U.S. market. Statoil fails to show, however, that this effect on U.S. commerce “gives rise” to its antitrust claim.

“Based on the language of Section 2 of the FTAIA, the effect on United States commerce — in this case, the higher prices paid by United States companies for heavy-lift services in the Gulf of Mexico — must give rise to the claim that Statoil asserts against the defendants. ... We find no evidence that this requirement is met here. The higher prices American companies allegedly paid for services provided by [one defendant] in the Gulf of Mexico does [sic] not give rise to Statoil’s claim that it paid inflated prices for [the other defendants’] services in the North Sea. ... [W]hile we recognize that there may be a connection and an interrelatedness between the high prices paid for services in the Gulf of Mexico and the high prices paid in the North Sea, the FTAIA requires more than a ‘close relationship’ between the domestic injury and the plaintiff’s claim; it demands that the domestic effect ‘gives rise’ to the claim” [Slip op. 19-20]

Furthermore, the legislative history supports the interpretation that the FTAIA excludes purely foreign transactions. Finally, any other interpretation would open U.S. courts to global claims on a scale never intended by Congress. Therefore, the plaintiff cannot present its antitrust claims in U.S. courts.

In a dissenters view, if there are adverse effects in the U.S., not only U.S. companies but also  foreign companies should have access to a U.S. court for filing an antitrust action. Therefore, the dissenter would not impose the requirement that the injury to the plaintiff be tied to the effect on U.S. commerce.

“With respect to my colleagues, I fear that their reading of the FTAIA will hinder its purposes and reduce the effectiveness of the antitrust laws. Nothing in the text of the FTAIA, or the Export Trading Company Act of 1982 as a whole, or its legislative history, casts doubt on the importance of deterring restraints of trade that affect United States commerce. The Supreme Court has repeatedly recognized that the accent of the Sherman and Clayton Acts is deterrence, requiring violators to pay full, treble damages, even if some plaintiffs gain a windfall or are foreigners.” [Slip op. 44-45]

Citation: Den Norske Stats Oljeselskap AS v. Heeremac Vof, No. 99-20763 (5th Cir. February 5, 2001).

NAFTA

NAFTA arbitration panel finds that U.S. has violated NAFTA equal treatment rules by its blanket moratorium on issuance of cross-border trucking permits to Mexican carriers

On February 6, 2001, an Arbitration Panel under Chapter Twenty of the North American Free Trade Agreement (NAFTA) published its final report in the matter of Cross-Border Trucking Services between the U.S. and Mexico. The U.S. had imposed a moratorium on the processing of applications by Mexican-owned trucking firms for permits to operate in the U.S. border states. The Bus Regulatory Reform Act of 1982 (BRRA) had imposed an initial moratorium against the issuance of new motor carrier operating permits to foreign carriers. The U.S., however, had immediately lifted the  moratorium on Canada.

The U.S. President continuously extended the 1982 moratorium with respect to Mexican trucking companies. There are, however, a few exceptions that permit Mexican trucking companies to operate in the U.S., e.g., in the commercial zones of border towns. With a letter to the then-U.S. Trade Representative Michael Kantor dated December 18, 1995, Herminio Blanco, Mexico’s Secretary of Commerce and Industry (SECOFI), asked for consultations under NAFTA Article 2006.

On September 22, 1998, Mexico formally requested a NAFTA Arbitration Panel, arguing that the U.S. has violated NAFTA by failing to phase out restrictions on cross-border trucking services and on Mexican investment in the U.S. trucking industry as required by the U.S. commitments in Annex I (reservations for existing measures and liberalization commitments). Mexico also complained that the U.S. has granted Canada national treatment. Therefore, the U.S. allegedly violated Articles 1202 (national treatment for cross-border services), and 1203 (most-favored nation treatment for cross-border services), and the investment-related Articles 1102 (national treatment) and 1103 (most-favored nation treatment).

Mexico does not argue that its regulatory system is equivalent to the U.S. or Canada, but claims that, in permit proceedings, Mexican trucking firms should receive an equivalent consideration on their individual merits and an opportunity to contest a denial. The U.S. countered that the lack of equivalency with the U.S. and Canada warrants the treatment of Mexican service providers differently in pursuit of a legitimate regulatory objective.

The Arbitration panel first holds that the U.S.’s blanket refusal to consider permits for any Mexican-owned carrier for cross-border trucking services breached its obligations under Annex I, Article 1202, and Article 1203. In addition, it finds that the inadequacies of the Mexican regulatory system are not bad enough for the U.S. to maintain the moratorium on permits to Mexican carriers. Finally, the U.S. is violating Annex I, Article 1102 and Article 1103 by adversely affecting Mexican nationals who invest in U.S. trucking companies.

The Panel also notes, however, that it is not setting the level of protection that NAFTA parties have to maintain in pursuit of legitimate regulatory objectives. Thus, the U.S. does not necessarily have to treat Mexican applications exactly the same as U.S. applications, as long as the U.S. agency reviews them on a case-by-case basis. If the U.S. decides to impose distinctive requirements on Mexican carriers then it must impose such requirements (a) in good faith with respect to a legitimate safety concern, and (b) in full compliance with all relevant NAFTA provisions.

Citation: In Matter of Cross-Border Trucking Services (Secretariat File No. USA-MEX-98-2008-01), Final Report of Panel, February 6, 2001. [Report is available on website of U.S. Trade Representative “www.ustr.gov”.]

TORTS

Majority of Australia’s highest court disagrees with U.S. authorities and holds that, in absence of prior similar crimes in its parking lot, owner of shopping center was not liable in tort to tenant injured by criminal attack in lot after owner had turned off lighting at closing time

Modbury Triangle Shopping Centre, Ltd. (the Centre) owned a shopping center near Adelaide, Australia. John Doe worked at a video store in the shopping complex. which had an outdoor area for parking cars. At night the car park was dark unless the car park lights were turned on. One night Doe closed the video store at around ten p.m. and went out to his car in the lot. On the way, three men attacked Doe with a baseball bat, inflicting serious injuries. The lights in the parking lot were not on at the time.

Doe and his wife sued the Centre for breach of a duty of due care as occupier of  the land. The trial judge ruled for Doe. He held that the Center owed a duty of care for the security of tenants and customers, and that it had breached that duty by not keeping the car park lights on at the time Doe was leaving the video store. The judge also held that causation was shown because there was "a clear connection between the safeguard of the lighting of the common area being denied to the plaintiff and the attack".

The Centre appealed to the Full Court of the Supreme Court of South Australia but that Court dismissed the appeal. The Centre then secured special leave to appeal to the High Court. There it maintained that it did not owe Doe a duty to take reasonable care to prevent harm from the deliberate criminal behavior of a third party. The Centre also argued that the finding of causation was in error.

In a 4 to 1 vote, the High Court allows the appeal. In the majority’s view, the Centre’s failure to leave the lights on might have made the crime easier to commit, as did the Centre’s decision to provide a parking lot in the first place along with Doe’s choice to park there. But it was not the proximate cause of Doe’s injuries.

“There may be circumstances in which, not only is there a foreseeable risk of harm from criminal conduct by a third party, but, in addition, the criminal conduct is attended by such a high degree of foreseeability, and predictability, that it is possible to argue that the case would be taken out of the operation of the general principle and the law may impose a duty to take reasonable steps to prevent it. The possibility that knowledge of previous, preventable, criminal conduct, or of threats of such conduct, could arguably give rise to an exceptional duty, ... appears to be the basis upon which United States decisions relating to the liability of occupiers have proceeded.” [N/A]

The majority also cites the Prosser and Keeton text on torts. The authors declare that there is normally much less reason to foresee acts on the part of others which are malicious and intentionally damaging than those which are merely negligent; and this is all the more true where, as is usually the case, such acts are criminal. Under all ordinary and normal circumstances, in the absence of any reason to expect the contrary, the actor may reasonably proceed upon the assumption that others will obey the criminal law. In the majority’s view, however, this does not square with the common law in Australia.

Citing many U.S. cases, the authors also note that the most common exception to a rule of nonliability is where the landowner is aware of prior similar criminal activity. “It could not reasonably be argued that the present is such a case. There had been illegal behaviour in the area. A restaurant near the car park had been broken into. During a period of a year before the incident in question, there had been two attempts to break into an automatic teller machine. About a year before the incident, the car window of an employee of the video shop had been smashed. This does not indicate a high level of recurrent, predictable criminal behaviour.” [N/A]

Citation: Modbury Triangle Shopping Centre Ltd. v. Anzil, 176 A.L.R. 411; [2000] HCA 61 (High Court, Australia).

WORLD TRADE ORGANIZATION

WTO Appellate Body affirms panel ruling that Korea’s regulation of imported beef violates trading rules derived from Agreement on Agriculture

The Appellate Body of the World Trade Organization (WTO) has essentially affirmed an earlier Dispute Settlement Panel Report finding that Korea has violated trading rules with its restrictive requirements on imported beef (see 2000 International Law Update 126). The Appellate Body circulated the report on December 11, 2000.

The U.S. and Australia had brought the complaint before the WTO in February 1999. With a Report circulated on July 31, 2000, the Panel had found that Korea’s restrictions on imported beef had to be phased out by January 1, 2001. Its dual retail system for beef, requiring separate distribution channels, is untenable under GATT. For example, foreign beef could only be sold in stores marked “Specialized Imported Beef Store,” thereby allowing distribution of imported beef in only about 10% of the retail outlets. Also, beef importers had to mark the meat with special display signs.

Korea appealed the findings. The Appellate Body essentially upholds the earlier Panel report, and concludes that: (1) The Panel had properly examined Korea’s commitment levels in its Schedule and in Annex 3 of the Agreement on Agriculture. Korea had argued on appeal that the Panel had allegedly made two findings outside the terms of reference by referring to Schedule LX which neither the U.S. nor Australia had specifically challenged.

(2) The Panel properly concluded that Korea did not correctly calculate its domestic support for beef in 1997 and 1998 pursuant to Article 1(a)(ii) and Annex 3 of the Agreement on Agriculture. The resulting subsidies to its cattle industry may thus differ from those permitted under Korea’s commitments under that agreement. The Appellate Body, however, disagrees with the Panel’s re-calculation of Korea’s domestic support for beef in 1997 and 1998 because the methodology was inconsistent with the Agreement. On the record before it, the Appellate Body finds itself unable to determine whether Korea’s subsidies in 1997 and 1998 were higher than permitted under the Agreement on Agriculture.

(3) The Panel correctly held that Korea’s dual retail system for beef is inconsistent with Article III:4 of GATT 1994 (equal conditions of competition for domestic and foreign products). Nor can this system be justified under Article XX(d) (exception from trading rules to protect exhaustible natural resources).

Citation: Korea - Measures Affecting Imports of Fresh, Chilled and Frozen Beef (WT/DS161/AB/R, AB-2000-8) (11 December 2000). [Report is available on WTO website “www.wto.org”; see also U.S. Trade Representative press release 00-86, December 11, 2000.]

WORLD TRADE ORGANIZATION

WTO Dispute Settlement Panel decides controversy over U.S. quotas imposed on lamb meat imports from Australia and New Zealand, finding that U.S. had acted inconsistently with several provisions of GATT 1994 and Agreement on Safeguards

A Dispute Settlement Panel of the World Trade Organization has issued its report in the dispute over U.S. safeguard measures on lamb meat from New Zealand and Australia. Circulated on December 21, 2000, the Report concerns the definitive safeguard measures that the U.S. had imposed in the form of a tariff-rate quota. Based on a complaint by U.S. trade organizations, the U.S. International Trade Commission (USITC) found on February 9, 1999, that increased imports of lamb meat posed a threat of serious injury to the U.S. lamb industry (see USITC Publication 3176 “Lamb Meat,” Investigation TA-201-68, April 1999).

The U.S. quota imposed on July 7, 1999, gave Australia for the first year an annual allocation of 17,139,582 kg, and New Zealand an allocation of 14,481,603 kg. For the first year, the In-Quota Tariff Duty was 9 percent, the Out-of-Quota Tariff Duty was 40 percent. The measure was to continue for a total of three years with increasing allocations and declining tariff duties. The safeguard measure did not apply to imports from Canada or Mexico, or from beneficiary countries of certain preferential trade arrangements such as those within the Caribbean Basin Economic Recovery Act.

Among other claims, Australia and New Zealand argued that the USITC report failed to show that increased lamb meat imports were threatening to cause serious injury to the U.S. domestic industry, and failed to comply with procedural requirements. On November 19, 1999, the WTO established a single panel to review both the New Zealand and Australian complaints.

The Panel found in its Report that, among other things, the U.S. acted inconsistently: (1) with GATT 1994 Article XIX:1(a) by failing to demonstrate the existence of “unforeseen developments”; (2) with Article 4.1(c) of the Agreement on Safeguards because the USITC omitted to obtain data regarding a major part of the domestic producers; and (3) with Article 4.2(b) of the Agreement on Safeguards because the USITC report did not show the required causal link between increased imports and threat of serious injury. The Panel therefore recommends that the U.S. bring its safeguard measures into compliance with its WTO obligations.

Citation: United States — Safeguard measures on imports of fresh, chilled or frozen lamb meat from New Zealand and Australia (WT/177/R) (December 21, 2000). [Report is available on WTO website “www.wto.org”.]

EU amends telecommunications, pharmaceutical and medical requirements under EU-U.S. Agreement  on Mutual Recognition. The EU Joint Committee under the Agreement on Mutual Recognition (MRA) between the EU and the U.S. has amended several Sectoral Annexes regarding telecommunications equipment, electromagnetic compatibility, pharmaceutical manufacturing, and medical devices. These Sectoral Agreements describe the technical requirements for the simplified sales of products in the EU and U.S. markets. The changes include, for example, a new definition of what “good manufacturing practice” for pharmaceuticals means in the U.S., and a list of medical devices that require premarket evaluations in the U.S. before sale in the EU. — The MRA which entered into force in December 1998 covers products representing more than $60 billion in annual trade between the EU and the U.S. It allows conformity assessments such as product tests, inspections and certifications to be conducted in the U.S. for EU requirements and vice versa. Thus, the MRA will eventually eliminate duplicate conformity assessments for telecommunications and computer equipment, electrical safety and electromagnetic compatibility, good manufacturing practices for pharmaceutical products, medical devices, and safety of recreational craft. Citation: Decision 1/2000 and 2/2000, 2001 O.J. of the European Communities (L 34) 55 & 68, 3 February 2001; U.S. Trade Representative press release 01-05, January 17, 2001.

U.S. statute speeds up citizenship process for foreign-born minors. Under prior U.S. law, adopted foreign-born children of a U.S. citizen did not automatically become citizens upon their immigration to the U.S. Their parents had to apply to the Immigration and Naturalization Service for a Certificate of Citizenship, a process that could take months, if not years. Streamlining the road to citizenship for foreign-born children of U.S. citizen parents who did not acquire U.S. nationality at birth, the Child Citizenship Act of 2000 entered into force on  February 27, 2001. The Act amends Section 320 of the Immigration and Nationality Act and applies to both adopted and biological children of U.S. citizens. These children can now obtain U.S. citizenship if all of these four conditions are met: (1) one of the parents is a U.S. citizen by birth or through naturalization; (2) the child is under the age of 18; (3) the child is residing in the U.S. as a lawful permanent resident alien and is in the legal and physical custody of the U.S. citizen parent; and (4) if the child is adopted, the adoption must be final. About 75,000 children have already met these conditions and became U.S. citizens as of February 27, 2001. Citation: Child Citizenship Act of 2000, Pub. Law 106-395 [H.R. 2883] (October 30, 2000), 114 Stat. 1631; State Department Website: “http://www.state.gov”.

EU imposes tariff quota on U.S. corn products following WTO decision in U.S.-EU wheat gluten dispute. Following the WTO dispute settlement panel which found that the U.S. quota on EU wheat gluten imports is incompatible with the Agreement on Safeguards, the EU made effective Regulation 1804/98 (1998 O.J. (L 233) 1) and Regulation 6/2001 (2001 O.J. (L 2) 4) which provide for an autonomous duty on U.S. corn residues (corn gluten fees) as well as a tariff quota. Citation: 2001 O.J. of European Communities (C 19) 20, 20 January 2001.

EU terminates anti-dumping proceeding regarding “paracetamol” originating in U.S., China, India and Turkey. In April 2000, the EU Commission had received a complaint lodged by the European Chemical Manufacturers’ Federations (CEFIC) about alleged dumping of the chemical paracetamol from the U.S., China, India and Turkey. In December 2000, however, CEFIC withdrew the complaint and the EU Commission has therefore terminated the anti-dumping proceeding. Paracetamol is an analgesic for home medication and effective against pain and fever. Citation: 2001 O.J. of  European Communities (L 41) 33, 10 February 2001.

Hague War Crimes Tribunal sentences three Serbs for sexual abuse offenses. In its first trial dealing exclusively with sexual violence, the U. N. War Crimes Tribunal at the Hague convicted and sentenced three Bosnian Serbs on February 22, 2001 for their roles in the rape, torture and enslavement of Bosnian Muslim women during 1992 and 1993 near the town of Foca, southeast of Sarajevo. Dragoljub Kunarac, 40, a former commander of the Bosnian Serb army, received a sentence of 28 years imprisonment. Radomir Kovac, 39, a former paramilitary commander, was sentenced to 20 years. Both men were accused of multiple rapes, torture and enslavement. Zoran Vukovic, 39, also a former paramilitary commander, was given 12 years for rape and torture. The Tribunal convicted two defendants of enslaving their female captives, some as young as twelve. Kunarac and Kovac had kept them in custody for as long as eight months during which they not only abused them sexually but also rented or sold them to other soldiers. For the first time, the verdict of an international tribunal has treated rape as a crime against humanity and has condemned conduct that,  in effect,  amounted to “sexual slavery.” [Editors’ Note: the “sexual slavery” claims raised by Korean women against Japan have never been passed upon by an international tribunal.] Legal experts said that the judgment  will almost certainly affect the jurisprudence of the new, permanent international criminal court and perhaps of  national judicial systems as well, as did decisions of the Nuremberg trials after World War II. Citation: The New York Times, February 23, 2001, Late Edition-Final, Section A, page 1, Col. 4 (byline of Marlise Simons).

Israel and U.S. initial air service agreement. On January 10, 2001, Israel and the U.S. initialed an Air Service Agreement that will permit airlines of both countries to engage in code sharing and other cooperative marketing agreements. The agreement is in the form of a protocol to the 1950 Air Transport Agreement between the two countries, and was signed by U.S. Special Negotiator Thomas J. White and Avner Yarkoni, Director General of Israel’s Civil Aviation Administration. Citation: U.S. Department of State Media Note, January 11, 2001.

NAFTA eliminates tariffs on nearly $1 billion in trade. Effective January 1, 2001, under a third tariff acceleration, the NAFTA countries (Canada, Mexico and the U.S.) have removed tariffs on approximately $867 million in trade. Originally, the tariff reductions were scheduled to be completed by the year 2008. The tariff eliminations apply to, among other things, footwear, chemicals, pharmaceuticals, auto parts, and batteries. Citation: U.S. Trade Representative press release 01-10, January 19, 2001.

U.S. implements international rules for hazardous materials transport. The U.S. Department of Transportation has issued a final rule to implement the United Nations Recommendations and the International Maritime Dangerous Goods Code (see 49 C.F.R. Parts 171, 172, 173 and 176). These rules facilitate the international transport of hazardous materials such as chemicals, and flammable or otherwise potentially dangerous products. Citation: 66 Federal Register 8644 (February 1, 2001).

U.S. has modified international income tax provisions for 2000. Tax year 2000 involves several changes in U.S. income tax law of international import. First, the maximum foreign earned income exclusion has gone up from $74,000 to $76,000. Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad tells the taxpayer whether he or she meets the requirements for excluding income earned abroad. Secondly, corporations that file Form 1120, U.S. Corporation Income Tax Return, and certain other income tax returns may have to attach to their returns new Schedule (N) (Form 1120), Foreign Operations of U.S. Corporations. The taxpayer has to attach Schedule N if, at any time during the tax year, the corporation had assets in, or ran a business in, a foreign country or U.S. possession. The instructions for Schedule N (Form 112) supply additional information. Third, the U.S. has repealed the foreign sales corporation (FCS) rules, though certain FCS’s with valid elections may go on using the FCS rules until January 1, 2002. Finally, for transactions after September 30, 2000, qualifying foreign trade income is generally excluded from taxable income. Individuals, corporations (including Subchapter S corporations), partnerships, and other pass-through entities are entitled to the exclusions. The taxpayer should calculate the exclusion on new Form 8873, Extraterritorial Income Exclusion. For further information, consult the instructions for Form 8873. Citation: See Internet web site: “http://www.irs.gov”.

U.S. State Department praises Lithuania for genocide conviction. On February 14, 2001, a domestic court in Vilnius, Lithuania, convicted Kazys Gimzauskas of taking part in genocide against Jews in Lithuania during the Nazi occupation of that country between 1941-44. The United States had denaturalized Gimzauskas, who is now ninety-three years old, in the mid 1990s. He is the first defendant ever convicted of genocide in a Lithuanian court, as part of attempts by the Lithuanian state to come to terms with the country’s history during World War II. The U.S. State Department applauds this process. Citation: Statement of Mr. Philip T. Reeker, Deputy Spokesman for U.S. Department of State, dated February 16, 2001. [See also “http://www.state.gov”.]

Canada and U.S. modify control systems for arms exports. The U.S. Department of State has issued a final rule to amend the Canadian Exemption of the International Traffic in Arms regulations (ITAR) (22 C.F.R. Part 126) to change the authorized end-users to include Canadian Federal or Provincial government authorities or a Canadian-registered person. It also amends the list of defense articles requiring a license. The changes reflect the results of bilateral Canada-U.S. discussions on export controls for arms. Citation: 66 Federal Register 10575 (February 16, 2001).

U.S. acts to control products of child labor. Pursuant to Executive Order No. 13126 (Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor), the Bureau of International Labor Affairs has published a list of products and countries of origin that likely have been produced with child labor. The same issue of the Federal Register contains related rules for federal contractors and on future updates of the list. Citation: 66 Federal Register 5353 (January 18, 2001).