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 12 (December)

CHILD ABDUCTION

On issues of first impression, Ninth Circuit holds that neither ne exeat clause in Mexican custody agreement nor Mexican legal concept of patria potestas conferred “rights of custody” on divorced Mexican husband under Hague Convention on International Child Abduction

In 1992, Rosa Teresa Gutierrez (Teresa) and Eduardo Arce Gonzalez (Arce), both Mexican citizens, got married in Guadalajara, Mexico. Within the next five years, they had two children. It appears that Arce had been physically abusing Teresa, even after a 1998 separation.

The final divorce agreement in 2000, as entered by a Mexican family court, gave Teresa custody of the children and granted visitation rights to Arce. It also contained a ne exeat clause, barring Teresa from taking the children out of Mexico without Arce’s permission. In the Spring of 2001, however, Teresa and her children entered the U.S., and applied for asylum as victims of domestic violence. An immigration judge granted it in June 2002.

In October 2001, the San Diego District Attorney petitioned the local Superior Court to order the children sent back to Mexico under the International Child Abduction Remedies Act [42 U.S.C. Sections 11601-11610]. Teresa then removed the action to federal district court. In December 2001, the district court concluded that Teresa had wrongfully taken the children out of Mexico in violation of Arce’s rights under the Hague Convention on the Civil Aspects of International Child Abduction. [October 25, 1980, T.I.A.S. 11,670, reprinted in 51 Federal Register 10,494 (March 26, 1986)]. Teresa appealed. Deciding two issues of first impression, the U.S. Court of Appeals for the Ninth Circuit reverses.

“ ... [W]e determine [first] whether a ne exeat clause contained in a foreign custody agreement constitutes ‘rights of custody’ under the [Hague Convention]. We hold that it does not ... . In doing so, we follow the approach taken by the Second Circuit in Croll v. Croll, 229 F.3d 133 (2d Cir. 2000), the only other Circuit to have addressed this question.” [Slip op. 1-2]

The plain text, purpose and drafting history of the Hague Convention shows that a ne exeat clause does not provide “rights of custody” to a parent who otherwise possesses only access rights to the children. Thus, Article 5 distinguishes between “rights of custody” and “rights of access.” Under Article 12, only a parent with rights of custody may petition for the return of children.

In this case, Arce claimed that he had custodial rights under the Hague Convention because of the ne exeat clause which purportedly granted him a right to determine the children’s residence. The Court disagrees. Rather, the ne exeat clause of the divorce agreement is a veto power, limiting the custodial parent’s right to expatriate the child.

“At most, Arce could, under the terms of his divorce agreement with [Teresa], refuse permission for his children to leave Mexico. He cannot, however, direct with any specificity where the children will reside ... This, in our view, hardly amounts to a right of custody, in the plainest sense of the term. ... By taking the children to the United States, [Teresa] has undoubtedly violated the terms of her divorce agreement, but addressing that violation is not within our purview. We conclude that under the text of the Convention the ne exeat clause is merely a condition designed to protect Arce’s access rights, and no more.” [Slip op. 18]

Secondly, the Convention’s preamble states that its key purpose is to “protect children internationally from the harmful effects of their wrongful removal or retention and to establish procedures to ensure their prompt return to the State of their habitual residence, as well as to secure protection for rights of access.”

Another Convention goal is to ensure that parents do not play jurisdictional games, hoping to alter or avoid custodial agreements or orders that originated at their place of habitual residence. In this case, a Mexican court determined the custodial arrangement. Letting Teresa and the children stay in the U.S. does not impair that court decision.

Finally, the Hague Convention’s drafting history shows that the drafters debated the issue of access rights. They did not, however, provide a remedy for a breach of these rights.

In the alternative, Arce raises another first impression issue on cross-appeal, i.e., whether the Mexican legal concept of patria potestas granted him rights of custody under the Convention. “The concept of patria potestas is derived from Roman law and originally meant paternal power over the family and household. In common law legal systems, patria potestas was first replaced by parens patriae and eventually by the ‘best interests of the child’ standard.[Cite] Many civil law countries, however, continue to recognize some form of patria potestas. ...”

“... Here, ... the parties have executed a formal, legal custody agreement, thus eliminating any basis for relying on patria potestas. Thus, we hold that patria potestas does not confer ‘right of custody’ upon a parent given access rights from a custody agreement.” [Slip op. 32-33]

Citation: Gonzalez v. Gutierrez, 311 F.3d 942 (9th Cir. 2002).

INTERNET

In action against Dow Jones & Co. for libel over Internet, Australian High Court rules that tort took place at point where subscribers downloaded it in Victoria State, plaintiff’s work place, thus Victorian defamation law governs and its courts are appropriate fora in which to litigate

Dow Jones & Co., Inc. (Dow) publishes the “Wall Street Journal” newspaper and Barron’s weekly print magazine. It is a Delaware corporation with its World Wide Web servers in New Jersey and its editorial offices in New York. For the last six years, Dow Jones has run WSJ.com, a subscription news site on the Web. It includes Barron’s Online where it publishes the text and pictures set forth in the current Barron’s magazine.

The Web enables a document to be stored in such a way on one computer connected to the Internet (the web server) that a person using another computer linked to the Internet (a web browser) can ask for and get an electronic copy of the document. A collection of documents or “web pages” is usually called a “web site.”

The originator of a document wishing to make it available on the World Wide Web has it placed in a storage area managed by a web server by “uploading” it. A stranger wishing to get hold of that document has to send a request to the relevant server, identifying the location of the originator’s web page by its “uniform resource locator (URL).” When the server delivers the requested document to the stranger’s computer, the process is usually referred to as “downloading.”

Barron’s Online for October 28, 2000, and the corresponding edition of Barron’s magazine dated two days later, featured an article entitled “Unholy Gains.” It referred several times to Mr. Joseph Gutnick, as allegedly involved in money laundering. Gutnick (plaintiff) lives in Victoria, Australia and has his business headquarters there.

He sued Dow in the Supreme Court of Victoria for libel. Plaintiff had the original process served on Dow outside Australia without leave of court under Victoria’s civil procedure rules. Dow made a conditional appearance. It then moved the Court either to set aside the service and complaint or to permanently stay further proceedings on the grounds of forum non conveniens. The plaintiff countered by insisting that his suit seeks only to have the courts of Victoria neutralize and repair Dow’s attack on his good Victorian reputation.

The trial court dismissed Dow’s application. The judge found that defendant had published its allegedly libelous statements in the State of Victoria when Dow fee subscribers had used their passwords to download the material in that State. This finding is central to resolving questions of jurisdiction, choice of law, and forum non conveniens in this litigation.

After Victoria’s Court of Appeal had denied Dow leave to appeal to it, Dow got special leave to obtain review by the High Court of Australia. That Court, however, unanimously dismisses Dow’s appeal.

Both sides agreed about two main principles of Australian law. First, an Australian court, whose jurisdiction a plaintiff has validly invoked, whether by personal service or “long-arm” statute, will forego the exercise of this jurisdiction on the grounds of forum non conveniens only if the plaintiff has chosen a clearly inappropriate forum.

Secondly, in trying a tort action in which the parties or the events have some links to a foreign jurisdiction, an Australian court will apply the lex loci delicti as the applicable law. As a result, the parties’ arguments centered on determining the relevant place in which Dow had published the alleged libels to third parties. Dow insisted that this situs was New Jersey while plaintiff pointed to Victoria as the locus delicti. From the latter proposition, plaintiff reasoned that Victoria was an appropriate forum.

The High Court preliminarily points to the general rationale underlying the law of defamation. “...[T]he law of defamation seeks to strike a balance between, on the one hand, society's interest in freedom of speech and the free exchange of information and ideas ... and, on the other hand, an individual's interest in maintaining his or her reputation in society free from unwarranted slur or damage.”

“The way in which those interests are balanced differs from society to society. ... [C]omparing the law of defamation in different countries can reveal differences going well beyond matters of detail lying at the edge of debate.” [Slip op. 14-15] Thus, the choice of the applicable law may substantially affect the outcome of a multistate case.

Under Australian law, for example, defamation is a tort of strict liability. A defendant may be liable even though no injury to plaintiff’s reputation was intended and reasonable care was taken. Moreover, defamation is bilateral. A party who may have spoken or written a statement defaming X does not commit the tort until it is “published,” that is, until one or more third parties understandingly hears or reads the statement. The Court notes that about 27 U.S. States, including California, Illinois, New York, Pennsylvania and Texas, by legislation (see The Uniform Single Publication Act of 1952) or by judicial decision, have adopted the so-called “single publication” rule in the defamation sector. Section 577A of the Restatement of Torts 2d (1977) sets out an American version of that doctrine. It provides in part that “(2) A single communication heard at the same time by two or more third persons is a single publication. (3) Any one edition of a book or newspaper, or any one radio or television broadcast, exhibition of a motion picture or similar aggregate communication is a single publication.”

“It was not until the middle of the twentieth century and the advent of widely disseminated mass media of communication (radio and nationally distributed newspapers and magazines) that choice-of-law problems were identified. In some cases, the law of the forum was applied without any explicit recognition of the possible application of some other law.”

“But then, by a process of what was understood as logical extension of the single publication rule, the choice of law to be applied came to be understood [in the U.S.] as largely affected by, perhaps even to be determined by, the proposition that only one action could be brought in respect of the alleged defamation, and that the place of publication was where the person publishing the words had acted.” [Slip op. 24-25]

The present Court, however, finds analytical problems with this approach. “For present purposes, what it is important to notice is that what began as a term describing a rule that all causes of action for widely circulated defamation should be litigated in one trial, and that each publication need not be separately pleaded and proved, came to be understood as affecting, even determining, the choice of law to be applied in deciding the action. To reason in that way confuses two separate questions: one about how to prevent multiplicity of suits and vexation of parties, and the other about what law must be applied to determine substantive questions arising in an action in which there are foreign elements.” [Slip op. 26]

The Court concludes that the global reach of the Internet does not require a novel legal approach. “It must be recognised ... that satellite broadcasting now permits very wide dissemination of radio and television and it may, therefore, be doubted that it is right to say that the World Wide Web has a uniquely broad reach. It is no more or less ubiquitous than some television services.”

“In the end, pointing to the breadth or depth of reach of particular forms of communication may tend to obscure one basic fact. However broad may be the reach of any particular means of communication, those who make information accessible by a particular method do so knowing of the reach that their information may have. In particular, those who post information on the World Wide Web do so knowing that the information they make available is available to all and sundry without any geographic restriction.” [Slip op. 30-31]

“Other territorial connections may also be identified. In the present case, Dow Jones began the process of making material available at WSJ.com by transmitting it from a computer located in New York city. For all that is known, the author of the article may have composed it in another State. Dow Jones is a Delaware corporation. Consideration has been given to these and indeed other bases of territorial connection in identifying the law that might properly be held to govern an action for defamation where the applicable choice of law rule was what came to be known as the proper law of the tort.” [Slip op. 31-32]

“Australian common law choice-of-law rules do not require locating the place of publication of defamatory material as being necessarily, and only, the place of the publisher's conduct (in this case, being Dow Jones’ uploading the allegedly defamatory material onto its servers in New Jersey).” [Slip op. 32]

“In defamation, the same considerations that require rejection of locating the tort by reference only to the publisher's conduct, lead to the conclusion that, ordinarily, defamation is to be located at the place where the damage to reputation occurs.”

“Ordinarily that will be where the material which is alleged to be defamatory is available in comprehensible form assuming, of course, that the person defamed has in that place a reputation which is thereby damaged. It is only when the material is in comprehensible form that the damage to reputation is done and it is damage to reputation which is the principal focus of defamation, not any quality of the defendant's conduct.”

“In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed.” [Slip op. 34]

Dow also seeks a stay of proceedings, contending that Victoria is clearly an inconvenient forum in which to litigate plaintiff’s claims. Rule 7.01(1) of the Victorian Rules provide that: “(1) Originating process may be served out of Australia without order of the Court where ‑ - (j) the proceeding is brought in respect of damage suffered wholly or partly in Victoria and caused by a tortious act or omission wherever occurring.”

“Dow Jones contended that Victoria was a clearly inappropriate forum because the substantive issues to be tried would be governed by the laws of one of the States of the United States. ... Dow Jones submitted that the defamation had occurred in New Jersey and that the substantive issues in the proceeding were, therefore, to be governed by the law of that State.”

“As has been noted earlier, Mr Gutnick has sought to confine his claim in the Supreme Court of Victoria to the damage he alleges was caused to his reputation in Victoria as a consequence of the publication that occurred in that State. The place of commission of the tort for which Mr Gutnick sues is then readily located as Victoria. ...”

“It follows, of course, that substantive issues arising in the action would fall to be determined according to the law of Victoria. But it also follows that Mr Gutnick's claim was thereafter a claim for damages for a tort committed in Victoria, not a claim for damages for a tort committed outside the jurisdiction. There is no reason to conclude that the primary judge erred in the exercise of his discretion to refuse to stay the proceeding.” [Slip op. 36-37]

“Finally, ... the spectre which Dow Jones sought to conjure up in the present appeal, of a publisher forced to consider every article it publishes on the World Wide Web against the defamation laws of every country from Afghanistan to Zimbabwe is seen to be unreal when it is recalled that, in all except the most unusual of cases, identifying the person about whom material is to be published will readily identify the defamation law to which that person may resort.” [Slip op. 41]

Citation: Dow Jones & Co., Inc. v. Gutnick, [2002] H.C.A. 56 (Aust. High Ct., December 10, 2002).

JUDICIAL ASSISTANCE

Ninth Circuit affirms denial of discovery requests in California federal court by foreign company for use in Chinese and Taiwanese litigation where foreign company had previously misappropriated trade secrets, and material in question was subject to protective order in Ohio proceedings

A Taiwanese company, Four Pillars Enterprises Co., Ltd. (FPE), sought to take depositions and to have documents produced under 28 U.S.C. Section 1782 from Avery Dennison Corporation (ADC) for use in FPE’s suits against ADC in China and Taiwan. Both FPE and ADC manufacture adhesive tape and labels. Several years ago, they began working on an Asian joint venture that later went sour over charges of stealing trade secrets.

FPE sued ADC in an Ohio federal court over misappropriation of trade secrets, and the jury found for ADC. The Ohio court entered a protective order for any material produced by ADC. It required that the parties could only use the confidential material in the Ohio proceedings.

FPE later brought the Section 1782 petition in a California federal court. A magistrate judge granted FPE the right to serve three of its document requests, but denied several others. FPE appealed. The U.S. Court of Appeals for the Ninth Circuit, however, affirms.

Section 1782 provides in part that: “(a) The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal, including criminal investigations conducted before formal accusation. The order may be made pursuant to a letter rogatory issued, or request made, by a foreign or international tribunal or upon application of any interested person and may direct that the testimony or statement be given, or the document or other thing produced, before a person appointed by the court ...”

The Court agrees with the lower court’s application of Section 1782 here. “The magistrate judge did not abuse his discretion in denying much of the relief sought by [FPE] pursuant to 28 U.S.C. Section 1782. Congress gave the federal district courts broad discretion to determine whether, and to what extent, to honor a request for assistance under 28 U.S.C. Section 1782. (Cite).” [Slip op. 7]

“Here, the magistrate was presented with a set of special circumstances that he was entitled to take into account. [ADC] had produced extensive confidential and trade-secret material in the Ohio civil litigation over the theft of such secrets. That litigation ended in a verdict finding that [FPE] had stolen secrets. In addition, [FPE] had been criminally convicted of attempt and conspiracy to steal [ADC’s] secrets.”

“The purpose of the Ohio protective order was to prevent misuse of the confidential material, including its use against [ADC] in retaliatory litigation. Faced with this unusual and unequivocal scenario, the magistrate judge did not abuse his discretion in concluding that a discovery order for this material under Section 1782 would improperly frustrate the order of the District Court for the Northern District of Ohio.” [Slip op. 10]

Although the judge below had also spoken of Section 1782's possible application to discover material located in Asia, the appellate Court does not rule on the issue. “The magistrate judge denied [FPE’s] requests for documents that [ADC] possessed in Asia, observing that he did ‘not view the purpose of Section 1782 as encompassing the discovery of material located in foreign countries.’”

“There is some support for the magistrate judge’s view. (Cite). We ourselves have described Section 1782 as legislation ‘which permits domestic discovery for use in foreign proceedings,’ but we did not rule on any attempted discovery outside the United States. (Cite) ...”

“In this case the responsive materials in issue were in China, where [FPE] was pursuing civil litigation against [ADC]. The Chinese courts are well situated to determine whether such material is subject to discovery, and in what manner.” [Slip op. 12-13].

Citation: Four Pillars Enterprises Co., Ltd. v. Avery Dennison Corp., 308 F.3d 1075 (9th Cir. 2002).

SOVEREIGN IMMUNITY

In litigation over six Gustav Klimt paintings currently in Austrian Gallery but which had been taken from Czech owner after Austria’s annexation by Hitler, Ninth Circuit rules that FSIA may apply to conduct that occurred before its enactment, and that FSIA expropriation exception applied and gave federal court jurisdiction over Austria despite claims of sovereign immunity

Maria Altmann, 86 years old, is one of the heirs of Ferdinand Bloch, a wealthy Czech sugar magnate. He died in November 1945 in Switzerland, leaving his estate to a nephew and two nieces, including Altmann. He had fled Austria shortly after its annexation by Adolf Hitler on March 12, 1938, leaving behind his sugar factory, a castle, and the Gustav Klimt paintings. Bloch’s wife Adele had predeceased him, and had asked Bloch in her will to “kindly” leave her six Klimt paintings to the Austrian Gallery. Recent valuations put them at $135 million.

In 1948, an agent of Austria’s Federal Monument Agency contacted the heirs’ Austrian lawyer, Dr. Rinesch, about the Klimt paintings. Finally, possibly based on misrepresentations made to them that Adele’s will was enough to confer title to the paintings on the Austrian Gallery, the heirs agreed to “donate” the Klimt paintings in exchange for export permits for the family’s other recovered artworks.

Then in 1998, the City of New York seized two Egon Schiele paintings on loan from Austria to the Museum of Modern Art in New York, stating that the Nazis had stolen them. The Austrian Minister for Education and Culture thereupon opened up the Ministry’s archives to permit research into the Austrian Gallery’s acquisition of the artworks. The documents that surfaced cast doubt on whether the Gallery had good title to the Klimt paintings. The Ministry’s advisory committee, however, recommended against their return.

Initially, Ms. Altmann had considered filing her case in Austria. Under the Austrian court system, however, she would have had to pay a filing fee of 1.2 percent of the amount in controversy plus another fee, totaling about $1.6 million.

Altmann then sued Austria and the Austrian Gallery (jointly Austria) in a California federal court. She alleged (1) that the Nazi Government had wrongfully taken the paintings from her Jewish uncle to “aryanize” them; (2) that the pre-World War II and wartime Austrian government took part in the wrongful seizure of the paintings; (3) that the current Austrian government deceived the heirs as to the circumstances under which it had obtained the paintings; and (4) that Austria and the Austrian Gallery are now wrongfully asserting ownership of the Klimt paintings. Austria moved to dismiss on a variety of grounds.

The district court denied Austria’s motion to dismiss for lack of jurisdiction, finding that the FSIA applied retroactively and generally to the underlying events that occurred in the late 1930s and 1940s, and that the taking of the paintings fell within the “expropriation exception” to the FSIA’s preservation of immunity. The U.S. Court of Appeals for the Ninth Circuit upholds jurisdiction under the FSIA, affirming and remanding for further proceedings.

The Court first turns to the applicability of the Foreign Sovereign Immunities Act (FSIA) [28 U.S.C. Sections 1602-1611] to this case. “The defendants maintain that jurisdiction is lacking because the FSIA may not be retrospectively applied to conduct pre-dating the U.S. Department of State’s ‘Tate Letter,’of 1952 [adopting the restrictive theory of sovereign immunity], while the last taking in this case purportedly occurred in 1948. [Cite] ... To the extent courts have considered the retroactivity of the FSIA, the consensus appears to be that it would encompass events dating back at least as far as the date of this letter...” [Slip op. 14-15]

The fact that a statute applies to conduct antedating the statute’s enactment does not necessarily make it work “retrospectively” and thus impermissibly. See Landgraf v. USI Firm Prods., 511 U.S. 244, 269 (1994). Rather, the Court must ask whether the statute attaches new legal consequences to events completed before its enactment. The Court thus turns to the second prong of the Landgraf test and examines “whether applying the FSIA would ‘impair rights a party possessed when he acted. [Cite]’”

“Determining whether the FSIA may properly be applied thus turns on the question whether Austria could legitimately expect to receive immunity from the executive branch of the United States for its complicity in, and perpetuation of, the discriminatory expropriation of the Klimt paintings. Mindful that such seizures explicitly violated both Austria’s and Germany’s obligations under the Hague Convention (IV) on the Laws and Customs of War on Land, Oct. 18, 1907, 1 Bevans 631, 1907 U.S.T. LEXIS 29 (entered into force Jan. 26, 1910), and that Austria’s Second Republic officially repudiated all Nazi transactions in 1946, we hold that Austria could not expect such immunity.” [Slip op. 23]

The Court then turns to the FSIA’s “expropriation” exception to state immunity. It provides that “[a] foreign state shall not be immune from jurisdiction of the courts of the United States or of the States in any case ... (3) in which rights in property taken in violation of international laws are in issue and ... that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States ... (28 U.S.C. Section 1605(a)). The facts alleged by Altmann fall squarely within the expropriation exception to sovereign immunity. There is no question but that ‘rights in property’ are in issue. ...”

The Court is aware that, at this jurisdictional stage, it may not be not appropriate to decide whether the taking actually did violate international law. As long as the claim is substantial and non-frivolous, it provides enough of a basis for the exercise of jurisdiction. The Court then supplies some substantive guidance for the lower court.

“To constitute a valid taking under international law three predicates must exist. First, ‘valid expropriations must always serve a public purpose.’ (Cite). Second, ‘aliens [must] not be discriminated against or singled out for regulation by the state.’ (Cite). Finally, ‘an otherwise valid taking is illegal without the payment of just compensation.’ (Cite). To fall into this exception, the plaintiff cannot be a citizen of the defendant country at the time of the expropriation, because ‘expropriation by a sovereign state of the property of its own nationals does not implicate settled principles of international law.’ (Cite)” [Slip op. 32-33]

If Altmann’s allegations are true, then a taking in violation of international law may have occurred in this case that confers jurisdiction upon U.S. federal courts. Austria’s profits from the Klimt paintings in the U.S., by promoting and distributing books and other publications containing their images, including the book “Klimt’s Women,” constitute “commercial activity” in the U.S. for purposes of the FSIA, and may also be a basis for jurisdiction.

Citation: Altmann v. Republic of Austria, Nos. 01-56003 & 01-56398 (9th Cir. December 12, 2002); Washington Post, December 14, 2002, page A5.

WORLD TRADE ORGANIZATION

In dispute over U.S. countervailing measures on certain European products, WTO Appellate Body reverses Panel Report, indicating that despite arm’s-length negotiations and fair market price in privatization of formerly government-owned companies, there may continue to be countervailable benefits to company

On December 9, 2002, the Appellate Body of the World Trade Organization (WTO) issued a report that reversed the earlier Panel report in the U.S.-European Communities dispute over U.S. countervailing measures on certain European products. See 2002 Int’l Law Update 123. The dispute concerns the countervailing measures that the U.S. had imposed on European government-owned steel companies that were later privatized.

The U.S. had conducted its investigations pursuant to Section 771(5)(F) of the Tariff Act of 1930 (19 U.S.C. Section 1677(5)(F)), which reads: “Change of ownership. A change in ownership of all or part of a foreign enterprise or the productive assets of a foreign enterprise does not by itself require a determination by the administering authority that a past countervailable subsidy received by the enterprise no longer continues to be countervailable, even if the change in ownership is accomplished through an arm’s length transaction.”

The U.S. found in 12 investigations that certain steel products made by European, formerly state-owned companies that were later privatized, had received countervailable subsidies before their privatization. The European Communities (EC) claimed that, in those 12 cases, the privatizations took place at arm’s length and at fair market value. The U.S. did not rebut these claims.

The Panel had previously found that the relevant internal U.S. legislation is inconsistent with the Agreement on Subsidies and Countervailing Duties (SCM Agreement). The Appellate Body, however, upholds the Panel’s finding that the U.S. had acted inconsistently with the SCM Agreement by imposing and maintaining countervailing measures on steel products from privatized steel companies in the EC without first determining whether government subsidies continued to exist.

In particular, the Appellate Body first finds that the Panel had properly concluded that the U.S.’s actions did not square with Articles 10, 14, 19.1, 19.4, 21.1, 21.2, and 21.3 of the SCM Agreement. The U.S. imposed and maintained countervailing duties without finding out whether a “benefit” continues to exist in several countervailing duty determinations (including “Stainless Sheet and Strip in Coils from France,” and “Stainless Steel Plate in Coils from Italy”) (see Paragraphs 8.1(a), (b) and (c) of Panel Report).

Secondly, it reverses the Panel’s finding that “[o]nce an importing Member has determined that a privatization has taken place at arm’s-length and for fair market value, it must reach the conclusion that no ‘benefit’ resulting from the prior financial contribution (or subsidization) continues to accrue to the privatized producer” (see Paragraph 8.1(d), first sentence, of Panel Report).

Thirdly, the Appellate Body reverses the Panel’s conclusion that Section 771(5)(F) of the Tariff Act of 1930 clashes with the SCM Agreement. Therefore, “the United States has failed to ensure conformity with Article 32.5 of the SCM Agreement and Article XVI.4 of the WTO Agreement respectively” (see Paragraph 8.1(d), second sentence, of Panel Report).

Finally, it upholds the Panel’s conclusion that, insofar as the U.S. has acted incompatibly with its duties under the SCM Agreement, these actions prima facie nullified or impaired benefits accruing to the EC pursuant to Article 3.8 of the Dispute Settlement Understanding. The U.S. has failed to rebut this presumption. (see Paragraph 8.2 of Panel Report).

Citation: United States - Countervailing Measures Concerning Certain Products from European Communities (WT/DS212/AB/R) (9 December 2002). [Panel Report, along with related information, is available on WTO website at “www.wto.org”.]

U.S. investment firm cleared to buy bankrupt Japanese mortgage company. In March 2002, Japan’s Shinsei Bank forced First Credit, a mortgage lender, into bankruptcy because the latter had not paid back a Bank loan of Yen 126 billion, about one-half of First Credit’s general indebtedness. Documents filed with the Tokyo Stock Exchange (TSE) in November said that the Japanese courts had given a green light for the U.S. investment fund, Lone Star, to acquire First Credit. Estimates are that Lone Star’s investment would exceed $816 million (Yen 100 billion). Japanese authorities have seldom authorized an international investment fund to take over an ailing Japanese financial services company. Ripplewood, the U.S. private equity firm, owns the Shinsei Bank. The court administrators for First Credit reported to the TSE that they had chosen Lone Star as the principal sponsor of First Credit’s rehabilitation by offering Lone Star first refusal on making an acquisition. They noted that Lone Star had pledged itself: (1) to aim for the highest level of repayment to creditors; (2) to keep job losses to a minimum; and (3) to put First Credit back on its feet more quickly than competing bidders. Two years ago, Lone Star bought Tokyo Sowa Bank, a retail lender, and reopened it as Tokyo Star Bank. If the Lone Star purchase goes through, it would tend to vindicate Shinsei’s approach that a more aggressive position on the assessment of credit risks can grease the skids for corporate restructuring without necessarily sacrificing jobs. Heizo Takenaka, Japan’s minister for the economy and financial services also favors giving private sector international buyers a chance to turn around struggling Japanese companies. Moreover, Mr. Takenaka is pressuring Japan’s largest banks to stiffen their lending standards to borrowers in plights like First Credit’s. Citation: Financial Times (London), Saturday, November 23, 2002, U.S.A. Edition 1, page 8 (byline of David Ibison).

Chile and U.S. agree to sign Free Trade Agreement. On December 11, 2002, after 14 negotiating rounds, the U.S. and Chile assented to an important Free Trade Agreement (FTA) to open up trade between the two countries. This FTA is the first comprehensive trade agreement between the U.S. and a South American country. It is expected to spur the negotiations for the Free Trade Area of the Americas (FTAA), to be finished in 2005. Currently, the U.S. has only four FTA partners: Canada, Mexico, Israel and Jordan. (In November, the U.S. Trade Representative announced a basic agreement on an FTA with Singapore.) Among the key points of the FTA with Chile are that 85% of bilateral trade in consumer and industrial products would become tariff-free, and Chile will provide adequate protections for U.S. intellectual property and investment rights . Under the Trade Act of 2002, the Administration has to inform Congress at least 90 days before signing the Agreement. The U.S. Trade Representative and the Chilean Foreign Minister expect to endorse the Agreement in early 2003. Citation: U.S.T.R. Press Release of December 11, 2002.

WTO gives U.S. more time to carry out WTO’s “hot rolled steel” ruling. On February 28, 2001, a WTO Dispute Settlement Panel issued a report in the dispute between Japan and the U.S. over antidumping duties which the U.S. Department of Commerce had imposed on certain Japanese steel products. The Panel found that the U.S. had acted inconsistently with the WTO Anti-Dumping Agreement and other trading rules in the investigation and anti-dumping decision. See 2001 Int’l Law Update 45. On February 19, 2002, a WTO arbitrator reported on what would be a reasonable time period for the U.S. to carry out the WTO recommendations, suggesting a deadline of November 23, 2002. See 2002 Int’l Law Update 44. On December 5, 2002, the WTO Dispute Settlement Body granted an extension to the U.S. to put into effect the recommendations with respect to U.S. antidumping measures on certain hot rolled steel products from Japan (DS184). Thus, the U.S. will have until December 31, 2003, or until the adjournment date the first session of the next U.S. Congress, whichever is earlier, to comply with the WTO’s ruling. Citation: United States - Anti-dumping measures on certain hot-rolled steel products from Japan: Request for modification of reasonable period of time (WT/DS184). [Information about December 5, 2002 Dispute Settlement Body meeting is available on WTO website News Section at “www.wto.org”.]

Hungarian tribunal finds for Anheuser-Busch in patent dispute. In a further phase of the more than ten years of litigation over the right to use the name “Budweiser” and its derivatives, the Hungarian Patent Office ruled in favor of U.S. firm Anheuser-Busch, Inc. and against the state-own Czech brewery, Budejovicky Budvar. See 2000 Int’l Law Update 27. The patent tribunal held that Anheuser-Busch was entitled to the exclusive use of the names “Bud” and “Budvar” and related variations. Although these terms had no appellation of origin, the panel did determine that the name “Budweiser” did have one. The latter is linked to the German name for Ceske Budejovice, the town in the Czech Republic in which the competing beer is made. According to the U.S. company, its founders from Germany in 1876 took the name from their homeland in which it was being used. Founded in 1895, the Czech brewery had contended that the disputed name was familiar in its home town as far back as the Middle Ages. Citation: The Associated Press (online), Tuesday, December 10, 2002 at 20:10:31 GMT (byline of Karl Peter Kirk, AP writer).

EU again updates its lists of restricted individuals and entities in fight against terrorism. The EU has issued several amendments to its current lists of individuals and entities who are subject to constraints under the antiterrorism rules. Council Decision 2002/974/EC amends the list of persons and entities on whom Council Regulation 2580/2001 (specific restrictive measures against persons and entities to combat terrorism) had placed restrictions. The list includes, for example, the Abu Nidal organization and the Shining Path. Council Common Position 2002/976/CFSP amends the list of restricted persons and entities under Common Position 2001/931/CFSP (specific measures to combat terrorism). The list is more comprehensive than the one in 2002/974/EC, and includes ETA activists, the Kurdistan Workers’ Party (PKK), and the terrorist wing of Hamas. - Commission Regulation 2083/2002 adds certain entities to the list of Council Regulation 881/2002 imposing restrictions on persons and entities that support Usama bin Laden, Al-Qaida and the Taliban. The EU has frozen the funds of all listed entities. The new entries include the Benevolence International Foundation, and the Bosanska Idealna Futura organization. Commission Regulation 1935/2002 has added the Jemaah Islamiya to the list of restricted entities under Regulation 881/2002. Commission Regulation 1754/2002 has named several individuals to the list of restricted individuals under Regulation 881/2002, including El Motassadeq and Said Bahaji. Citation: 2002 O.J. of European Communities (L 337) 85 [2002/974/EC]; (L 337) 93 [2002/976/CFSP]; (L 319) 22 [2083/2002]; (L 295) 11 [1935/2002]; (L 264) 23 [1754/2002] (published between October 2 and December 13, 2002).

In dairy case against Canada, WTO panel rules in favor of U.S. and New Zealand. On December 20, 2002, a World Trade Organization appeals panel ruled that Canada has been unfairly subsidizing dairy products sold to the U.S. and New Zealand. The trade dispute principally pertains to cheeses from Quebec and Ontario, valued at more than $258 million per year. The offending arrangement was Canada’s Commercial Export Milk program which the panel branded a banned export subsidy. According to the U.S. Trade Representative, American dairy farmers have been hurting because of Canada’s long-standing subsidization of its dairy industry. The New Zealand Trade Minister noted that “Canada's illegal export subsidies cost New Zealand about $35 million per year.” The WTO ruling concluded that Canadian milk producers could sell to milk processors at below cost because the government of Canada was setting the domestic price of milk at above-market prices. As a result, many Canadian milk producers can cover their fixed production costs by selling in the highly profitable domestic market. The present proceedings have been going on since 1999. New Zealand and the U.S. could now petition the WTO for leave to impose trade sanctions upon Canada. Citation: The Associated Press (online), Friday, Dec. 20, 2002; 21:47:02 GMT [See http://news.findlaw.com].

Poland and U.S. agree on narcotics cooperation. On November 13, 2002, the Acting Assistant U.S. Secretary for International Narcotics and Law Enforcement Affairs and the Polish Interior Minister signed an agreement on U.S.-Polish law enforcement cooperation. The agreement includes an assistance package for various projects, such as the Development of an Anti-Corruption Curriculum, Courtroom Security, as well as Police Modernization and Training. The Police training will be conducted by the U.S. Department of Justice’s International Criminal Investigative Assistance Program. Citation: U.S. Department of State Fact Sheet (November 13, 2002).

U.S. ratifies two Protocols on Rights of Child. The U.S. State Department announced that, on December 23, 2002, the United States deposited its ratifying instruments with the United Nations with respect to the two Optional Protocols to the Convention on the Rights of the Child. The Senate’s prior consent was unanimous. The first Optional Protocol deals with the involvement of children in armed conflicts. Among other matters, it confirms that the minimum age is 18 years for compulsory recruitment into a State Party’s armed forces. In addition, States Parties have to take all feasible measures to ensure that members of their armed forces who are under 18 years of age do not take a direct part in hostilities. The second Optional Protocol pertains to the sale of children, child pornography, and child prostitution. It is the first instrument of international law to lay down legal definitions of these terms. This Protocol requires States Parties to protect children up to the age of 18 by treating the actions of exploiters as serious criminal acts. Government or rebel forces exploit over 300,000 girls and boys in over 30 armed conflicts around the world. They serve as soldiers, runners, guards, sex slaves and spies. An estimated one million children are currently trafficked for coerced sexual exploitation or labor. The victims typically suffer fear, pain, degradation and often death. Note that, as of June, 2002, the U.S. and Somalia were reportedly the only two nations that have failed to ratify the main instrument, The Convention on the Rights of the Child. Citation: Media Note, Office of State Department Spokesman, released December 23, 2002. [To obtain other press statements, see http://www.state.gov/r/pa/prs/ps/].

U.S. continues sanctions against UNITA of Angola. Pursuant to Section 202(d) of the National Emergencies Act [50 U.S.C. Section 1622)(d)], President Bush has announced the continuation for another year of the national emergency with respect to the National Union for the Total Independence of Angola (UNITA). It extends Executive Order 12865, which prohibits the sale or supply by U.S. persons of arms, related material, petroleum, and petroleum products, except for designated points of entry into Angola. With separate Executive Orders 13069 and 13098, the U.S. had blocked all UNITA assets in the U.S., banned the import of Angolan diamonds, and restricted the sale of mining and transportation equipment to Angola. Citation: 67 Federal Register 60105 (September 25, 2002).

Tunisia signs trade and investment agreement with U.S. On October 2, 2002, the U.S. Trade Representative and the Tunisian Minister of Development and International Cooperation signed a trade and investment agreement. The new Trade and Investment Framework Agreement (TIFA) sets up a U.S.-Tunisia Council on Trade and Investment with members from both countries. The Council will then set up mechanisms for further trade and investment expansion. In 2001, the U.S. exported $278 million worth of goods to Tunisia, and imported $122 million worth of Tunisian goods. Citation: U.S. Trade Representative press release 02-92 (October 2, 2002).

U.S. Treasury blocks properties of additional persons and entities due to terrorism suspicions. The U.S. Treasury, Foreign Assets Control Office, has added 25 individuals and entities to the ones whose properties have been blocked pursuant to Executive Order 13224 of September 23, 2001. This XO pertains to persons who commit, threaten to commit, or support terrorism. The new additions include Akida Bank Private Limited, Nascoservice S.R.L., and Nada International Anstalt. Citation: 67 Federal Register 66708 (November 1, 2002).

New York State fines Western Union over improper money transfers. New York State’s bank regulators recently imposed an $8 million dollar fine on Western Union Financial Services, Inc., a unit of First Data Corp. in Denver. They charged that the company was inadequately supervising their money transfer agents. For instance, some of them were failing to aggregate multiple daily transactions of tens of thousands of dollars which the same customer would carry out through different agents. In 2001, Western Union handled 109 million transactions and started up over 15,000 new transfer sites during the first quarter of 2002. According to state officials, Western Union omitted to file almost 600 currency-transaction reports since January 2002 which involved more than $10,000 in one day. It also failed to send in 63 suspicious-activity reports in violation of the USA Patriot Act’s new programs to prevent international money-laundering. According to the Department, however, there was no indication that the improperly-reported transfers had anything to do with terrorist activities. Citation: Reuters (online), December 2002 (byline of Greg Cresci). [See also www.findlaw.com]

U.S. State Department publishes amended list of reciprocating countries as to family support obligations. The U.S. Department of State, Office of the Legal Advisor, has published an amended list of nine countries which the U.S. has declared to be reciprocating nations in the enforcement of family support (maintenance) obligations on behalf of U.S. residents. See 2002 Int’l Law Update 14. The currently listed countries are Australia, the Canadian Provinces [of British Columbia, Manitoba, Newfoundland/Labrador, Nova Scotia, and Ontario], the Czech Republic, Ireland, The Netherlands, Norway, Poland, Portugal, and the Slovak Republic. U.S. agencies taking part in the program of Title IV-D of the Social Security Act must also provide enforcement to those countries’ awards as if the request came from a U.S. state. The law also allows individual U.S. states to set up or continue reciprocating family or child support arrangements with foreign countries where there has been no federal declaration. Citation: 67 Federal Register 71605 (December 2, 2002). [For further detailed information, e-mail your request to ocseinternational@acf.hhs.gov].

Canada and U.S. sign Yukon Salmon Agreement. On December 4, 2002, on behalf of their respective countries, the U.S. Under Secretary of State for Global Affairs and the Canadian Minister of Fisheries and Oceans signed the Yukon River Salmon Agreement. This Agreement sets out the U.S.-Canadian cooperative approach to conserving salmon stocks that originate in the Yukon River in Canada. Key elements of the Agreement are that the parties will establish a binational Yukon River Panel and Yukon River Joint Technical Committee. These are to bring about precautionary abundance-based harvest sharing for upper Yukon chinook and chum salmon. Citation: U.S. Department of State press statement of December 4, 2002.

State of Brunei Darussalam enters into trade and investment agreement with U.S. On December 16, 2002, the U.S. Trade Representative and Brunei Darussalam’s Minister of Trade and Natural Resources signed a Trade and Investment Framework Agreement (TIFA). This TIFA is intended to strengthen trade and investment between the two countries. To this end, it sets up a Joint Council as a forum where the two countries can regularly address issues such as intellectual property rights, biotechnology policy, and tourism. Citation: U.S. Trade Representative press release of December 16, 2002.

U.S. Federal Trade Commission approves I.B.M. deal with Hitachi. International Business Machines Corp. (IBM) of the United States some time ago agreed to sell its hard-disk drive assets to Hitachi Ltd. of Japan for $2.05 billion dollars. IBM, the world's largest marketer of computers, is sloughing off its unprofitable businesses and, to reduce its costs, having other companies make some of its hardware. The European Commission, the Japan Fair Trade Commission, Brazil’s Conselho Administrativo de Defesa Economica and Taiwan’s Fair Trade Commission have already given the arrangement antitrust clearances. On Monday, December 2, 2002, the U.S. Federal Trade Commission also announced its approval of the deal. The two giant companies have a pending request for clearance of the arrangement from Mexican regulators since IBM has a plant in that country. Citation: The New York Times, December 3, 2002, Tuesday, Late Edition ‑ Final, Section C; Page 6; Column 5 (byline Bloomberg News); Reuters Group (online), New York City, Monday, December 2, 2002.

World Court awards Bakassi Peninsula to Cameroon. On October 10, 2002, the International Court of Justice held at The Hague that Cameroon was the legal owner of the Bakassi Peninsula, a potentially oil-rich area in the Gulf of Guinea which Nigeria had long claimed. With a common border 1,000 miles long, the two nations have contested their rights to the area, sometimes using armed force, for over ten years. The Bakassi’s nearness to large existing oil fields suggests that it may have deposits of hundreds of millions of barrels of oil. Substantial oil finds in Bakassi should boost Cameroon’s lagging economy. Some Nigerian officials worry that the loss of Bakassi might jeopardize Nigeria’s shipping access to the Atlantic, requiring leave of Cameroon for the passage of Nigerian vessels. The Court ruled 16 to 1 that the Anglo-German Agreement of 1913 had awarded sovereignty over the disputed peninsula to Cameroon. The latter was a former German protectorate later carved up by the French and the British. Nigeria had been a British Colony which gained its independence in 1960. The Court ordered each country to move its troops off of land handed over to the other party. Though Cameroon had asked that Nigeria pay it compensation for its lengthy occupation of Bakassi, the Court declined to so order. Citation: The New York Times, October 11, 2002, Friday, Late Edition -Final; Section A, Page 13, Column 5 (bylines of Marc Lacey and Neela Banerjee).

U.S. agrees to allow more Russian steel exports to U.S. The U.S. Commerce Department reports that the U.S. has agreed with the Russian Federation to enable it to export about 300,000 short tons of extra “slab steel” to the U.S. every year. (Slab is a type of half-completed steel that needs more processing into specific products.) The Assistant Secretary of Commerce for Import Administration explains that the arrangement in effect exempts Russia from U.S. tariffs as high as 30% on ten classes of steel products imposed earlier in 2002. It required the amendment of the U.S.-- Russia Comprehensive Agreement on Steel which had restricted Russian slab exports to the U.S. to about 1.0 million tons. The U.S. also agreed to allow the Federation’s steel plate manufacturers to market their products more favorably in the U.S. The U.S. now regards Russia as a “market economy” within American anti-dumping laws. While the new agreement gets rid of a steel plate quota, it does impose a duty on Russian steel firms to report on their detailed cost data twice each year. Citation: Reuters Group (online), Tuesday, November 19, 2002 (byline of Doug Palmer).