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.

1995 International Law Update, Volume 1, Number 11 (November).

ARBITRATION

Second Circuit holds that district court erred in compelling Liquidator of insolvent Kentucky insurance company to arbitrate with foreign insurers under New York Arbitration Convention because the latter did not pre-empt Kentucky liquidation statute

In 1985, a Kentucky state court found that American Delta re Insurance Company (Delta) was insolvent and appointed a Liquidator. The Liquidator filed suit in the Southern District of New York against various U.S. and foreign reinsurance companies, who had ceded risks to Delta, to recover present and future premiums due to Delta.

One insurer, British Aviation Insurance Company, Ltd., moved to compel arbitration under Chapter 2 of the Federal Arbitration Act (FAA) which implements the New York Arbitration convention [21 U.S.T. 2517, 330 U.N.T.S. 18]. Relying on domestic U.S. law rather than the Convention, the lower court found that the FAA pre-empted the anti-arbitration provisions of the Kentucky statute and declined to compel arbitration.

On appeal of this issue, however, the U.S. Court of Appeals for the Second Circuit reverses.  The foreign insurers had argued that, pursuant to the Supremacy Clause, the Convention preempted the Kentucky statute. The Court reads the Convention, however, as a non-selfexecuting treaty having no automatic effect as binding domestic law within the U.S. Chapter 2 of FAA is the vehicle for translating the Convention into domestic law.

On the other hand, the McCarran-Ferguson Act, 15 U.S.C. § 1012(b) (1994) provides that courts shall not construe any act of congress as superseding any law that regulates the business of insurance. Since the Kentucky statute falls into that class, the FAA does not compel arbitration as to these foreign insurers.

Citation: Stephens v. American International Ins. Co., No. 1516, 94-9143, 64 U.S.L.W. 2165 (2nd Cir. September 14, 1995).

COMPETITION

EU publishes notice on the application of EC competition rules to banks' cross-border credit transfers

The EC Commission outlined its view on the application of competition rules (EC Treaty Arts. 85 and 86) to cross-border credit transfers. The notice replaces the "Principles on competition for credit transfer systems" (1992). Applying to credit institutions and other participants in the cross-border credit transfer system, the notice summarizes the Commission's view of the relevant markets, the pricing of cross-border transfer systems, and multilateral interchange fees. The membership in cross-border credit transfer systems must take into account EU laws other than competition rules, for example the freedom of movement as to services and the Second banking directive (Directive 89/646/EEC).

Citation: 1995 Official Journal of the European Communities (C 251) 3, 27 September 1995.

CONTRACTS

Private yacht racing rules agreed to by participants in regattas waived inconsistent provisions of convention on collisions at sea, according to First Circuit

In October 1992, two large sailing yachts, the ENDEAVOUR and the CHARLES JOURDAN were competing in two nearby but separate regattas in waters off Southern France. By agreement, the International Yacht Racing Rules (IYRR) governed both races. As the two vessels converged on a buoy, however, the boom of the ENDEAVOUR struck the CHARLES JOURDAN's backstay, causing $10,000 in damages. An International Jury found that, under the IYRR, ENDEAVOUR should have yielded to the CHARLES JOURDAN.

In September 1993, the CHARLES JOURDAN sued the ENDEAVOUR for damages in a Maine federal court. Plaintiffs invoked not only the IYRR but also the Convention on the International Regulations for the Prevention of Collisions at Sea (COLREGS). After a bench trial in admiralty, the district court ignored the IYRR and the jury findings. Applying COLREGS as a treaty with world-wide applicability, it found the CHARLES JOURDAN 60% liable because, as overtaking vessel, it should have kept clear of ENDEAVOUR. The court thus reduced plaintiffs' award to $4,000. The CHARLES JOURDAN appealed.

In a case of first impression, the U.S. Court of Appeals for the First Circuit reverses and orders defendants to pay the full $10,000. It holds that when the yacht owners had voluntarily agreed to abide by the IYRR and its due process procedures, they had contracted not only to waive any inconsistent provisions of COLREGS but also to abide by the Jury findings. Blind application of COLREGS among private vessel owners in this situation, the Court noted, would be logically unsound. "The [lower court's] decision could even have a serious negative impact on such international races as the America's cup or the yachting events of the forthcoming Olympic games in Atlanta." [p. 7]

Citation: Juno SRL v. S/V Endeavour, 58 F.3d 1 (1st Cir. 1995).

CRIMINAL PROCEDURE

D.C. Circuit lifts lower court injunction against physical surrender of extraditees

On August 31, 1995, the District Court for the District of Columbia concluded that the U.S. extradition statute (18 U.S.C. 3184) violates the separation of powers doctrine by permitting the Secretary of State to "review" decisions of extradition judges. On September 15, 1995 the court enjoined the government from "surrendering, under Title 18, § 3184 et seq., of the United States Code, the plaintiffs or any member of the plaintiff class to another nation, pending further order of this court." [see 1995 Int'l L. Update 4 (October)]. On September 29, 1995, the U.S. Court of Appeals for the District of Columbia Circuit issued a brief order lifting the injunction. The Court stayed the district court's order of September 15, 1995, with respect to all persons other than the petitioners.

In the meantime, federal courts have issued orders on extraditions. In one case, the U.S. District Court for the Southern District of New York did not follow Lobue. Switzerland is seeking the extradition of Ira Harvey Cherry under the U.S.-Swiss extradition treaty. The court concluded that Lobue is insufficient to afford petitioner relief at this time.  Cherry's claims under Lobue are not ripe unless and until the magistrate judge has found that petitioner is extraditable. Furthermore, Lobue appears inconsistent with Ward v. Rutherford, 287 U.S.App.D.C. 246, 921 F.2d 286 (1990), which found the extradition statute to be constitutional. See Cherry v. Warden, 95 Cr. Misc. 1 p.7 (S.D.N.Y. October 11, 1995).

Citation: Lobue v. Christopher, No. 95-5293 (D.C. Cir. September 29, 1995).

GOVERNMENT

PROCUREMENT

EU Council adds Austrian, Finnish and Swedish authorities to E.C. regulation on U.S. access to public contracts

EC Council Regulation 1461/93 restricts access for United States tenderers in respect of certain contracts awarded by certain public authorities.  Following the accession of Austria, Finland and Sweden to the European Union, it was necessary to adapt the list of "purchasing entities" listed in the Annex to Regulation 1461/93 by adding similar entities from these three States. The new Regulation 1836/95 contains such lists of "purchasing entities" in the new Member States.  This Regulation entered into force on August 3, 1995.

Citation:  Council Regulation (EC) No 1836/95 of 24 July 1995 completing the Annex to Regulation (EC) No 1461/93 concerning access to public contracts for tenderers from the United States of America, 1995 Official Journal of the European Communities (L 183) 4, August 2, 1995.

IMMIGRATION

Fourth Circuit holds en banc that withholding of deportation does not require separate determinations as to dangerousness to the community of aliens convicted of aggravated felonies

After American courts had convicted a Liberian citizen and a Panamanian citizen of drug offenses, immigation judges and the Board of Immigration Appeals found both ineligible for "withholding of deportation." Petitioners argued to the Circuit Court that the statute clearly requires the Attorney General to make a separate determination of dangerousness even as to convicted felons.

Denying the petitions for review, the U.S. Court of Appeals for the Fourth Circuit holds en banc 7 to 5 that 8 U.S.C. § 1253(h)(2)(B), which authorizes withholding of deportation, does not require a separate determination of dangerousness to the community in the case of an aggravated felon. "We agree with the view of the INS that the alien constitutes a danger to the community because he has been convicted of a particularly serious crime, so once the particularly serious crime determination is made, the alien is ineligible for withholding without [the need for] a separate finding on dangerousness. ... In addition, this interpretation is one that we share with five other circuits [the 5th, 7th, 9th, 10th, and 11th Circuits]." [page 1088-1089]

The Court also rejects Petitioners' reliance on Article 33 of the United Nations Convention Relating to the Status of Refugees (July 28, 1951) [to which the U.S., not being a signatory, is bound as to Articles 2-34 via the Protocol Relating to the Status of Refugees (January 31, 1967), 19 U.S.T. 6223, T.I.A.S. 6577]. The Court considers the provision on "refoulement" identical to the statute, so that someone who has been convicted of a particularly serious crime is inherently a danger to the community.

Citation: Kofa v. U.S. Immigration & Naturalization Service, 60 F.3d 1084 (4th Cir. 1995).

Airline held not responsible for expenses of detaining aliens without visas who request asylum while in transit through the U.S.

Though hundreds of airlines have agreements with the INS for "transit without visa" for passengers seeking asylum, several have challenged the imposition on them of the expenses of their temporary detention.

The U.S. Court of Appeals for the Second Circuit rules that Linea Area Nacional de Chile (LAN) is not responsible to the Immigration and Naturalization Service (INS) for these expenses because the 1986 amendments to the Immigration and Nationality Act had relieved airlines of this burden. Congress had repealed Section 233 of INA (8 U.S.C. § 1223), which made carriers responsible for such aliens. Thus the INS now lacks the power to contract with air carriers to be responsible for expenses incurred for asylum seekers. The Court also finds that Congress has waived sovereign immunity to allow the airlines to recover the moneys that carriers have paid to the INS.

Citation:  Linea Area Nacional de Chile S.A. v. Meissner, No. 94-6288 (2nd Cir. September 11, 1995).

JUDICIAL ASSISTANCE

German competent authorities for the Hague Service Convention published

The German federal gazette (Bundesgesetzblatt) issued a notice on the Hague Convention on Service Abroad of Judicial and Extra Judicial Documents in Civil or Commercial Matters (T.I.A.S. 6638, 20 U.S.T. 361).

The revised list of German central authorities for matters arising under the Convention is as follows:

Baden-Württemberg, Justizministerium Baden-Württemberg, Schillerplatz 4, D-70173 Stuttgart.

Bayern, Bayerisches Staatsministerium der Justiz, Justizpalast, Prielmayerstrasse 7, D-80335 München.

Berlin, Senatsverwaltung für Justiz von Berlin, Salzburger Str. 21-25, D-10825 Berlin.

Brandenburg, Ministerium der Justiz des Landes Brandenburg, Heinrich-Mann-Allee 107, D-14460 Potsdam.

Bremen, Der Präsident des Landgerichts, Domsheide 16, D-28195 Bremen.

Hamburg, Präsident des Amtsgerichts Hamburg, Sievekingplatz 1, D-20355 Hamburg.

Hessen, Hessisches Ministerium der Justiz, Luisenstrasse 13, D-65185 Wiesbaden.

Mecklenburg-Vorpommern, Ministerium für Justiz, Bundes- und Europaangelegenheiten des Landes Mecklenburg-Vorpommern, Demmlerplatz 14, D-19503 Schwerin.

Niedersachsen, Niedersächsisches Justizministerium, Am Waterlooplatz 1, D-30169 Hannover.

Nordrhein-Westfalen, Präsident des Oberlandesgerichts Düsseldorf, Cecilienallee 3, D-40474 Düsseldorf.

Rheinland-Pfalz, Ministerium der Justiz, Ernst-Ludwig-Strasse 3, D-55116 Mainz.

Saarland, Ministerium der Justiz, Zähringerstrasse 12, D-66119 Saarbrücken.

Sachsen, Sächsisches Staatsministerium der Justiz, Archivstrasse 1, D-01097 Dresden.

Sachsen-Anhalt, Ministerium der Justiz des Landes Sachsen-Anhalt, Wilhelm-Höpfner-Ring 6, D-39116 Magdeburg.

Schleswig-Holstein, Der Justizminister des Landes Schleswig-Holstein, Lorentzendamm 35, D-24103 Kiel.

Thüringen, Thüringer Justizministerium, Alfred-Hess-Str. 8, D-99094 Erfurt.

Citation: Bekanntmachung über den Geltungsbereich des Haager Übereinkommens über die Zustellung gerichtlicher und aussergerichtlicher Schriftstücke im Ausland in Zivil- oder Handelssachen, 1995 [German] Bundesgesetzblatt II, number 28, page 755, September 22, 1995.

JURISDICTION

In blood contamination case, Irish Supreme Court denies stay of Irish court proceedings to allow plaintiffs to return to New York federal court which had already found that it was not convenient forum

Irish domiciliaries sued Armour Pharmaceutical Company, Inc. (Armour), a New York domiciliary, and others in a New York federal court claiming that they or their deceased had gotten AIDS from contaminated blood supplied by Armour. On motion of defendants, the New York court stayed its proceedings conditioned on defendants' submission to an Irish court as the more convenient forum. Once in that court, however, plaintiffs sought to stay the Irish proceedings on forum non conveniens grounds so that they could return to the New York court. One of plaintiffs' grievances lay with the Irish system of pretrial discovery. The Irish Supreme Court, however, declines to order a stay and dismisses the appeal. If plaintiffs had been unhappy with the American court's ruling, the proper procedure would have been a direct appeal.

Moreover, the Court views it as unjust to demand that defendants in effect start over again in the federal court which had already ruled that the Irish courts were the more convenient forum. Finally, the American court had already set the main condition for return as being an Irish court's holding that it lacked jurisdiction to hear the case on the merits.

Citation:  Doe v. Armour Pharmaceutical Co., Inc., [1995] Int. Lit. Proc. 48.

Under forum conveniens doctrine, Ontario court declines to dismiss suit brought by Ontario residents against U.S. corporation arising out of Florida slip-and-fall accident

While on a Florida holiday in February 1990, Eva Dino, an Ontario resident, slipped and fell in a supermarket owned by Albertson's, Inc., a Delaware corporation, seriously injuring her knee. In August 1993, Eva, her husband and her daughter Monika sued Albertson's for more than $1,000,000 in an Ontario court with service upon defendant in Florida. Monika also filed a Canadian Family Law Act claim since she has had to drop her career to look after her mother. Defendant then moved to dismiss on the grounds that Ontario was not the convenient forum.

The Ontario Court of Justice (Gen. Div.) weighs the relative burdens on both sides and denies the motion. It notes that defendant had many stores throughout the U.S. and is thus presumably geared up to deal with the evidence transportation problems that often arise in the litigation of accident claims in many states. Plaintiffs, on the other hand, have long been Ontario residents on whom the hardship of litigating in Florida would be much greater. Moreover, Eva's knee condition needs long-term care within Ontario. Finally, although the ordinary negligence law appears to be quite similar in both Ontario and Florida, the daughter's cause of action does not exist in Florida.

Citation:  Dino v. Albertson's Inc., [1995] Int. Lit. Proc. 443.

Düsseldorf Court of Appeal concludes that Krefeld Landgericht had jurisdiction over dispute between German buyer of wood-cutting machine and its Indiana manufacturer

Plaintiff, a German corporation, bought a wood-cutting machine from an Indiana corporation and installed it in a furniture combine in Russia. Some time thereafter, there was an accident involving the machine that killed one worker and injured another. On demand of its Russian contractor, plaintiff allegedly spent DM 273,207 [about $191,000] to correct the problem. It then sued the American company in the Krefeld Landgericht for reimbursement and for indemnification for present and future damage claims arising out of the accident. Defendant unsuccessfully made a preliminary challenge to the international jurisdiction of the German court and then appealed.

The Düsseldorf Court of Appeal affirms. It finds that Section 29(1) of the German Code of Civil Procedure grants competence in contract cases to the court of the place where defendant was to perform its obligations. Under German law, Indiana law determines the place of performance as Indiana is defendant's main center of management. Indiana having implemented the U.N. Convention on Contracts for the International Sale of Goods, Article 57(1)(a) read with Articles 45 and 74 persuade the Court that plaintiff is to litigate its claim at the seat of the creditor, i.e., Krefeld.

Citation:  Re a Wood-Cutting Machine, [1995] Int. Lit.Proc. 191.

MARITIME LAW

U.S. Supreme Court rules that trial court erred in telling jury in Jones Act case not to count time that injured plaintiff's vessel was in German drydock

Antonios Latsis was a salaried engineer for Chandris' fleet of six passenger vessels. In May 1989, his ship's doctor failed properly to treat plaintiff's serious eye condition while his ship was sailing from Baltimore to Bermuda. Despite emergency surgery, plaintiff lost 75% of the vision in his right eye. In September 1989, plaintiff sailed with a Chandris ship to Bremerhaven for a six months period of overhaul. Plaintiff later sued Chandris under the Jones Act. The Act gives heightened legal protection to "seaman" over other maritime workers because of their exposure to the perils of the sea. The district court told the jury not to count the time when plaintiff's ship was out of navigation in Germany. The jury found for plaintiff but the Court of Appeals vacated the award, believing the instruction incorrect.

In an opinion for six justices, Justice Sandra Day O'Connor affirms the need for a new trial. Justice O'Connor reviews the "labyrinth" of precedents and formulates a twofold test of the employment relationship between a maritime employee and a ship in navigation for Jones Act purposes. First, the worker must contribute to the function of the vessel or to the carrying out of its mission. Secondly, the maritime worker must have an allegiance to a vessel or to an identifiable group of vessels in navigation that is substantial in terms of both its duration and its nature. Whether a ship in a relatively short six-month drydock period is in or out of navigation is normally a fact-specific jury question. In the absence of overwhelming evidence, therefore, the trial court erred in taking that issue away from the jury.

Justice John Paul Stevens, with whom Justices Thomas and Breyer join, concur in the outcome. They differ, however, in the test to be applied. In their minds, a ship's employee actually injured while exposed to the perils of the sea as plaintiff was, is always a "seaman" under the Jones Act, regardless of what he was doing before or after the voyage.

Citation: Chandris, Inc. v. Latsis, 115 S.Ct. 2172, 132 L.Ed.2d 314 (1995).

PATENTS

Change to terms of protection made in European Patent Convention

Several states, including Austria, have adopted the changes in Article 63 of the Convention on the Grant of European Patents of 5 October 1973 (13 I.L.M. 271). Article 63 now provides that the term of the European patent shall be 20 years from the date of filing. However, states may extend such protection if there is an intervening emergency or if the product must undergo an administrative authorization procedure. The Austrian Bundesgesetzblatt reprinted the English, French and German versions of Article 63.

Citation: Akte zur Revision von Artikel 63 des Übereinkommens über die Erteilung europäischer Patente (Europäisches Patentübereinkommen) vom 5. Oktober 1973, 1995 [Austrian] Bundesgesetzblatt, 191. Stück, number 591, page 7245, 31 August 1995.

SOVEREIGN IMMUNITY

The Sixth Circuit rules that FSIA service provision § 1608(e) applies to default judgments against foreign agencies, instrumentalities and political subdivisions, and that enforcement depends on actual notice

Several plaintiffs who had been injured by asbestos brought  suit in Ohio against Atlas Turner, Inc. (Atlas), a subsidiary of Société National l'Amiante, a Crown Corporation of Canada, and others. During 1985, the parties settled most of these cases without Atlas' participation.

The plaintiffs obtained default judgments against Atlas, and sought to enforce the judgments in 1990. They served the default judgments on an attorney who in the meantime had withdrawn as Atlas' counsel.

Atlas unsuccessfully moved for relief from the judgments under F.R.Civ.Pro. 55(c) and 60(b)(4), and then appealed, arguing that it did not receive proper service of the default judgments under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq.

Atlas contended that because its counsel had withdrawn, the default judgments were void as not having been served in accordance with FSIA § 1608(e) [... A copy of any such default judgment shall be sent to the foreign state or political subdivision in the manner prescribed for service in this section.]

The U.S. Court of Appeals for the Sixth Circuit affirms in part and reverses in part. First, the Court reads § 1608(e) to require any judgment, including judgments against agencies and instrumentalities or political subdivisions to be sent to the foreign state. Without such service, the default judgment would be voidable. It would not be void, however, because there would be no change in the propriety of the judgment.

Whether or not the judgments here were voidable depends on whether Atlas had actual notice. Atlas' former attorney asserted the attorney-client privilege when asked whether he had forwarded the judgments to Atlas. The Court notes that the attorney-client privilege does not apply to the mere mailing of the application for default judgment. If Atlas lacked actual notice, however, the district court might have to set aside the default judgments.

The Court therefore remands for further findings and a determination of whether Atlas had received notice of entry of judgment and whether, even if Atlas had notice, good cause exists to set aside the default judgment.

Citation: Antoine v. Atlas Turner, Inc., No. 94-3355 (6th Cir. September 20, 1995).

Ninth Circuit holds that pork processing plant owned by governmental parent is not agency or instrumentality of foreign state under FSIA

Alberta Pork Producers Development Corp. (Alberta Pork), is a Canadian governmental entity that markets and promotes hogs raised in the Canadian province of Alberta. Alberta Pork bought a pork processing company in British Columbia with a California subsidiary. Employees of the subsidiary in California sued the subsidiary because it had terminated their employment and health coverage. Plaintiffs also named Alberta Pork and the parent company, among others, as defendants. Defendants sought dismissal pursuant to the Foreign Sovereign Immunities Act of 1976 [28 U.S.C. §§ 1602]. Refusing to dismiss, the district court found defendants subject to federal jurisdiction because their actions came within the "commercial activities" exception.

Upon appeal, the U.S. Court of Appeals for the Ninth Circuit holds that Alberta Pork did not waive its sovereign immunity because it was not involved in the subsidiary's termination of employee benefits. The FSIA provides immunity to "foreign states," and "any agency or instrumentality of a foreign state."  The parent company in British Columbia -- a simple pork-processing plant -- cannot be considered an agency or instrumentality of the Province of Alberta. Alberta Pork is entitled to immunity unless it falls within one of the FSIA exceptions.

The FSIA may subject foreign state entities that are engaging in "commercial activities" to jurisdiction in the United States if the cause of action is "based on" those activities. The FSIA presumes, however, that courts are to treat separate juridical entities as independent from one another. In this case, Alberta Pork's stock ownership of the parent, without more, did not create any relationship to the California plaintiffs' claim against the subsidiary.

Citation: Gates v. Victor Fine Foods, 54 F.3d 1457 (9th Cir.), cert. den., 64 U.S.L.W. 3223, 3245 (1995).

TAXATION

Canadian Supreme Court holds that Bahamian company with its headquarters in United States is not resident in U.S. within meaning of Canada-United States Tax Convention

Norsk Pacific Steamship Company, Ltd., (Norsk) is a Bahamian corporation with its sole place of business in the San Francisco area. Its principal source of income derives from the international carriage of newsprint. Norsk also rents maritime barges to Crown Forest Industries Ltd. (Crown Forest) which the latter uses to carry wood products to markets in Canada and the United States. A New Zealand company owns both Norsk and Crown Forest. Believing that Norsk was a "resident" of the United States within the meaning of the Canada-United States Tax Convention of 1980 [T.I.A.S. 11087, Tax Treaties (CCH) p.1031], Crown Forest withheld 10% of the rental for Canadian tax purposes for taxation years 1987-89. Canadian tax authorities, however, reassessed the tax rate at the usual non-resident rate of 25%, deeming that Norsk was not "resident" in the United States.

Pursuant to a reciprocal exemption under U.S. law for foreign trading corporations, Norsk actually paid no U.S. tax on the rental payments. After lower federal courts (in which the U.S. had intervened) ruled in favor of the lower rate, the matter came before the Supreme Court of Canada.

Disagreeing with the lower courts, that Court holds that the Canadian government should withhold at the 25% rate. Analyzing Article IV of the Tax Convention and comparing it to similar provisions in other tax treaties such as the O.E.C.D. Model Tax Convention, the Court construes it liberally to achieve its intent to avoid double taxation of international corporations. That Article defines a "resident of a contracting state" as "a person who under the laws of that state is liable to taxation [in one of the two contracting states] by reason of its domicile, residence, place of management, place of incorporation or any other criterion of a similar nature." Since Norsk's business and its earned income is connected to the U.S., it was liable (but for the above exemption) to U.S. taxation for income sources in the U.S. but not for its worldwide income.

In the Court's view, however, the Convention treats as a "resident" of the U.S. only an entity that is subject to full taxation by the U.S. on its worldwide income. Thus, Norsk was not an Article IV resident of the U.S. for purposes of paying the reduced tax rate.

Citation: The Queen v. Crown Forest Industries, Ltd., 125 D.L.R.4th 485 (Can.Sup.Ct. 1995).

Federal Circuit declines to disregard eighty-year-old Supreme Court case holding that taxation of insurance on exports is unconstitutional

When the IRS audited the excise tax returns of IBM for tax years 1975 through 1984, it concluded that, under 26 U.S.C. § 4731, IBM owed an excise tax of 4% on premiums its subsidiaries paid to foreign insurers who insured common carrier shipments of IBM equipment to its foreign subsidiaries. The policies listed both IBM and the sub as beneficiaries.

The statute imposes the 4% tax on each policy of casualty insurance issued by a foreign insurer (not otherwise subject to U.S. income taxes) to a domestic company against risks wholly or partially within the U.S.

IBM paid the taxes and then sued the United States in the Federal Claims Court for a refund. IBM argued that such a tax on premiums of products in the export stream is in practical effect a direct tax on the products themselves and thus invalid under Article 1, Section 9, Clause 3 of the Constitution. The so-called Export Clause provides that "No Tax or Duty shall be laid on Articles exported from Any State." Relying on Thames & Mersey Marine Ins. Co. v. United States, 237 U.S. 19 (1915), the Claims Court ruled for IBM. The United States appealed, challenging the authority of Mersey as modern precedent.

The U.S. Court of Appeals for the Federal Circuit affirms. The Court rejects the government's arguments that the tax is valid because it is general and nondiscriminatory and does not specifically target the exported product. Despite some evidence of a later lack of judicial enthusiasm for the rule in Mersey, the Supreme Court's related precedents have not "clearly foreshadowed" that it might overrule it.

Citation: International Business Machines Corp. v. United States, 59 F.3d 1234 (Fed. Cir. 1995).

TRADE

In antidumping proceeding, Federal Circuit holds that tax-neutral method used by Commerce Department in adjusting for fact that Japan imposes a value added tax on home sales of antifriction bearings but not on exports was reasonable

When foreign producers sell their goods in the U.S. at a price less than they bring in the home market (HM), the Department of Commerce has the duty of determining whether this constitutes "dumping." Japan imposes a value-added tax (VAT) on bearings in the HM but not on exported bearings. This creates the appearance of dumping though the Japanese companies have no control over the terms of the tax. The search, therefore, has been for a tax-neutral method of determining the dumping margin, i.e. the gap between foreign market value (FMV) and the U.S. price (USP) to determine the amount of compensatory duties. Two domestic companies challenged Commerce's method of computing the dumping margin in a suit against the U.S. and several Japanese bearing makers. The U.S. Court of International Trade found Commerce's method for determining USP impermissible.

On appeal by defendants, however, the U.S. Court of Appeals for the Federal Circuit reverses. In an effort to avoid the so-called multiplier effect of using the VAT percentage rate, Commerce had added the actual amount of VAT paid on HM sales of the bearings to get the FMV and then added the same amount to the USP. Though the language of the statute is ambiguous, the Court concludes that the method Commerce used here was a not unreasonable way of achieving a large measure of tax neutrality as Congress intended.

In addition, Article VI(4) of the GATT seems to demand tax neutrality, though in case of conflict with federal statutes, the latter would control. Nevertheless, by general canons of statutory construction, federal courts are to read statutes in light of the nation's international obligations. Finally, separation-of-powers considerations also counsel judicial deference to the executive branch's reasonable efforts to achieve tax neutrality in this area.

Citation:  Federal Mogul Corp. v. United States, 63 F.3d 1572 (Fed. Cir. 1995).

European Union imposes anti-dumping duty on disodium carbonate originating in the United States

The EU Council has imposed anti-dumping duties on disodium carbonate (soda ash, CN code 2836 20 00) originating in the United States.  Soda ash is a very common chemical, used in the glass, steel, chemical, detergent, paper and pulp industries, as well as for food and water treatment. The U.S. sold 578,000 tons in the EC in 1992 (9.7% European market share in 1992).

The U.S. companies for whom anti-dumping duties between 2.5% and 8.9% have been specified in the Regulation are FMC, AG Soda Corp., General Chemical Partners, NACC, Rhône-Poulenc of Wyoming, and Solvay Minerals Inc. For other exporters, the anti-dumping duty is 13.9%. The Commission will review the issue in October of next year.

Citation: Council Regulation (EC) No 2381/95 of 10 October 1995 imposing a definitive anti-dumping duty on imports of disodium carbonate originated in the United States of America ..., 1995 Official Journal of the European Communities (L 244) 32, 12 October 1995.

TRANSPORTATION

Delta Airlines' petition for review of DOT's award of two London routes to American Airlines is denied by D.C. Circuit

After two routes to London became available for U.S. air carriers, the Department of Transportation [DOT] began carrier selection procedures under its expedited "show cause" process of Subpart Q. American and Delta air lines sought these routes. After considering only the written submissions from the airlines and other parties, DOT awarded both routes to American. DOT conceded that awarding one of the routes to Delta would enhance competition among U.S. carriers since American was already the dominant carrier in the U.S. to U.K market. On the other hand, DOT deemed American's better ability to compete with foreign carriers the more urgent concern. Delta then filed a petition for judicial review.

The U.S. Court of Appeals for the District of Columbia Circuit, however, denies Delta's petition. It rejects Delta's claim that DOT had disregarded its own regulations by failing to employ a procedure insulated from political influence including an evidentiary hearing before an ALJ. The Court also sees no merit in Delta's complaint about the power of a political appointee to determine which procedure to adopt in a route selection matter.

The Court concludes that, though aware of the dangers of political influence in awarding international air routes, Congress had consciously declined to require DOT to make use of insulated procedures in all international carrier proceedings. Finally, DOT's assessment of the relevant statutory factors fell within its congressional mandate.

Citation: Delta Air Lines v. Dept. of Transportation, 51 F.3d 1065 (D.C. Cir. 1995).

Greenhouse effect:  The United States Environmental Protection Agency (EPA) has proposed to adopt international figures on the "global warming potential" of certain ozone-depleting substances (which are already regulated under the Montreal Protocol as implemented in the U.S. Clean Air Act (CAA), 42 U.S.C. 7401 et seq.). The figures have been developed by the United Nations Environment Program and the World Meteorological Organization, and would be regulated in the CAA. Citation: 60 Federal Register 52357.

International tax law in Switzerland:  The Swiss Tax Department published two handbooks on Swiss tax treaties and administrative regulations, Internationales Steuerrecht der Schweiz and Steuerentlastungen auf Grund von Doppelbesteuerungsabkommen. They can be obtained from the Eidgenössische Steuerverwaltung, Abteilung DBA, CH-3003 Bern.

EC harmonization:  The EC Commission has published its Twelfth Annual Report on Monitoring the Application of Community Law.  Each year the Commission presents a report on how member states have implemented EC directives. The report reviews the percentage of implementation in specific sectors, such as competition, pharmaceuticals and environment.  Citation:  Twelfth annual report on monitoring the application of Community law - 1994, 1995 Official Journal of the European Communities (C 254) 1, 29 September 1995.

U.S. Technical cooperation with Russia:  The United States and Russia have concluded four cooperation agreements in the areas of nuclear research and space flight. The agreements entered into force on June 30, 1995.  Citation:  [U.S. Department of State] Dispatch, September 11, 1995, Vol. 6, Number 36, page 690.

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

Mike Meier, summary of legal developments. Copyright 2017 Mike Meier, Attorney at Law.

1995 International Law Update, Volume 1, Number 10 (October).

ARBITRATION

Seventh Circuit rules on whether federal courts have power to compel arbitration between two foreign citizens where arbitration agreement fails to specify either location for arbitration or method of choosing panel

M. de Mere, a French national who held patents on ballasts for fluorescent and other lamps, contracted with Mr. Jain, an Indian citizen, for the latter to help the former to market his inventions. A clause in the contract provided that the parties could only submit a dispute to an arbitral body "applying French laws." When a dispute arose over Jain's proper share of the royalty moneys Motorola Lighting, Inc. of Illinois was paying de Mere, Jain demanded arbitration in Illinois. De Mere, however, objected that arbitration had to take place in France. When Jain petitioned the local federal district court for enforcement, the court held that it had jurisdiction under the Federal Arbitration Act [FAA] [9 U.S.C. §1ff] relating to international commercial arbitration and the New York Convention [21 U.S.T. 2517] but that the failure of the contract to specify either a place for the hearing or the manner of choosing arbitrators made it impracticable to enforce the agreement.

The U.S. Court of Appeals for the Seventh Circuit, however, reverses and remands the case. The Court first holds that the fact that French law was to apply does not control either the place of arbitration or the manner of choosing the panel. Section 4 of FAA requires a federal court to compel arbitration in its own district in the absence of the parties' choice of place and §5 allows the court to name the arbitrators where the agreement is silent on that point.

Nor do jurisdictional difficulties bar local arbitration. M. de Mere failed to object in timely fashion to lack of personal jurisdiction or to defective service of process. Nor has he moved to dismiss on grounds of forum non conveniens. "To the extent future parties wish to avoid the uncertainty of leaving the forum question open, they can always specify the location of arbitration and the method of selecting an arbitrator in their initial agreement." [692]

Citation: Jain v. De Mere, 51 F.3d 686 (7th Cir. 1995).

CHOICE OF LAW

Third Circuit reads Lauritzen, Romero and Hellenic Lines cases as governing choice of law, not subject matter jurisdiction

The U.S. Court of Appeals for the Third Circuit, in an en banc opinion, holds that the multi-factored analysis established by Lauritzen v. Larsen, 345 U.S. 571 (1953), Romero v. International Terminal Operation Co., 358 U.S. 354 (1959) and Hellenic Lines Ltd. v. Rhoditis, 398 U.S. 306 (1970) governs choice of law, not subject matter jurisdiction, in Jones Act and American general maritime law claims.  The present case involves a claim by a crewmember, a young American woman, who was injured by the propellers of a scuba diving vessel at a resort in St. Lucia.

As for the reasonableness of applying U.S. law, the Court explains: "If the court concludes that the evidence as a whole does not establish the existence of any foreign contacts that would provide a foreign nation with a basis for prescriptive jurisdiction, the plaintiff immedi-ately prevails on the choice of law issue:  a preponderance of -- indeed, all -- the evidence shows that the application of American law in such a case is reasonable.  As long as the plaintiff has shown a basis for prescriptive jurisdiction, ... American interests are implicated, and maritime law may apply unless concerns about conflicts with the law of other interested nations compel the conclusion that this would not be reasonable." [40]

Even though there were foreign contacts here, the defendants failed to present information concerning what potentially applicable St. Lucian law might provide.  Unable to determine the extent of foreign interests at stake, the Court sees application of American law as reasonable, unless virtually all of the Lauritzen factors point away from the U.S.  The Court then proceeds to apply those factors, which are (a) the inaccessibility of a foreign forum, (b) the law of the forum, (c) the place of the wrongful act, (d) the place of contract, (e) the law of the flag, (f) the defendants' allegiance, bases of operation, and other contacts with the U.S., and (g) the domicile or allegiance of the injured seaman. Concluding that the application of American law is reasonable, the Court remands for entry of judgment for the plaintiff on the Jones Act and related claims.

Citation:  Neely v. Club Med Management Services, Inc., No. 93-2069 (3rd Cir. July 26, 1995).

COMPETITION

United States and Europe reach agreement on mutual cooperation in the enforcement of their respective competition laws

Effective retroactively to September 23, 1991, the United States and the European Community concluded an agreement that will govern the interaction between the U.S. and EC competition laws.  Since the European Court of Justice had found that the EC Commission alone lacked competence to approve such an arrangement, the EC Council concluded it on April 10, 1995.

Under this agreement, each party must notify the other whenever its competition authorities become aware that their enforcement activities may affect important interests of the other party (which includes mergers and acquisitions). The EC and U.S. competent authorities may coordinate their enforcement activities.

To avoid conflicts, the agreement outlines factors to determine whether a party's "important interests" are affected by a certain enforcement activity, and provides for consultations.

The competent authority for the EC is the Commission. The Antitrust Division of the U.S. Department of Justice and the Federal Trade Commission are the competent authorities for the U.S.

The agreement broadly defines "anticompetitive activities" as any conduct or transaction that is impermissible under the competition laws of either party.

Citation: Decision of the Council and the Commission of 10 April 1995 concerning the conclusion of the Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws, 1995 Official Journal (L 95) 45, April 27, 1995.  The interpretative letter should be replaced by the one published in a corrigendum at 1995 Official Journal (L 131) 38, June 15, 1995.

United States enacts statute regulating the disclosure of information by the Department of Justice and the Federal Trade Commission to certain foreign authorities engaged in antitrust enforcement

On November 2, 1994, the "International Antitrust Enforcement Assistance Act of 1994" went into effect as Public Law 103-438. Assuming the existence of an antitrust mutual assistance agreement [AMAA] to share antitrust information between the United States and another country, the statute provides the appropriate domestic machinery for aiding the foreign antitrust authority (FAA). The United States and Canada have a 1984 memorandum of understanding on this subject [see 23 I.L.M. 275] and the EC Council has recently approved such an arrangement [see above].

Among the issues addressed by P.L. 103-438 are the following. In addition to information sharing, §3 authorizes American authorities to initiate a domestic investigation at the request of an FAA. In §4, there is machinery for federal district courts to provide judicial assistance to the FAA such as by taking testimony or obtaining documents. Exceptions to such cooperation are found in §5, e.g., for certain privileged information. Section 7 regulates the publication of proposed AMAA's. There is an extensive definition of statutory terms in §12. Other sections deal with conditions on use of AMAA's, limitations on judicial review, preservation of existing authority, reports to congress and authority to receive reimbursements for assistance given to an FAA.

Citation:  108 Stat. 4597, 34 I.L.M. 494-502 (1995).

CRIMINAL PROCEDURE

DC District Court finds federal extradition statute unconstitutional on Separation of Powers grounds

Two off-duty Chicago police officers allegedly tried to take a woman from her Canadian parents and back to the U.S. Canada sought to extradite them on kidnapping charges.  The U.S. District Court for the District of Columbia holds, however, that the 150-year-old extradition statute [18 U.S.C. §§3181-3195] violates separation of powers.

Judge Lamberth explains this result: "Once a federal extradition judge has certified an individual as extraditable, §3184 commits to the Secretary of State's sole discretion the decision whether to complete the extradition process by signing a warrant of surrender.  ... The question presented by this case is whether a statute may confer upon the Secretary of State the authority to review the legal determinations of federal extradition judges.  Upon consideration of the relevant authorities, the court finds that, while the statute certainly purports to grant the Secretary this power, it is a power which the Constitution forbids him from exercising." [6]

Thereafter, the plaintiffs filed a motion for emergency relief.  On September 15, 1995, Judge Lamberth issued a two-page order certifying as a class all people against whom the U.S. Government has sought or will seek extradition. He then enjoined the U.S. from physically extraditing anyone to any foreign state until the issue has been resolved on appeal.

Citations: Lobue v. Christopher, No. 95-1097 (D.D.C. August 31, 1995).

Switzerland to revise law on international judicial assistance in criminal matters with effects on the Swiss-American MLAT

On May 23, 1995, the Swiss Government issued a Note concerning proposed changes in the Swiss Law on Judicial Assistance, the Treaty with the U.S. on Judicial Assistance in Criminal Matters, and on a Reservation concerning the European Agreement on Judicial Assistance in Criminal Matters.

The proposed revisions will address the delays in judicial assistance that parties have experienced in the past (for example in the Pemex and Marcos cases).  The delays are due to the burdensome procedure required by the Law on Judicial Assistance in Criminal Matters (Bundesgesetz vom 20. März 1981 über internationale Rechtshilfe in Strafsachen, IRSG), because procedures differ among the Swiss Cantons, and because parties have abused procedural remedies to delay the process.

  In particular, the revisions will simplify the IRSG, for example, by limiting the procedural remedies, by dropping the formal objection, and by unifying the procedure for judicial assistance for the whole country. According to the proposal, only individuals who are directly affected by a measure of judicial assistance may lodge an objection.

The proposal would reserve Switzerland's right to refuse judicial assistance if a court has already considered the subject matter in a criminal proceeding. They would also require that the requesting party use the results of the judicial assistance only for the purposes specified in the official request.

The Note contains the drafts of the revised IRSG, the revised Law on the Treaty with the U.S. on Mutual Assistance in Criminal Matters (Bundesgesetz vom 3. Oktober 1975 zum Staatsvertrag mit den Vereinigten Staaten von Amerika ueber gegenseitige Rechtshilfe in Strafsachen, BG-RVUS), and the Swiss reservation to the European Convention.

The competent authority for judicial assistance in criminal matters in Switzerland is the Federal Police Agency (Bundesamt für Polizeiwesen).

Citation:  Botschaft betreffend die Änderung des Rechtshilfegesetzes und des Bundesgesetzes zum Staatsvertrag mit den USA ueber gegenseitige Rechtshilfe in Strafsachen ..., 1995 Bundesblatt, number 20, Band III, May 23, 1995. The Treaty on Mutual Assistance in Criminal Matters, United States‑Switzerland (May 23, 1973) is at 27 U.S.T. 2019, T.I.A.S. No. 8302 (entered into force January 23, 1973).

ENVIRONMENT

EC and Canada to agree on fishing quotas to resolve recent shooting dispute in North Atlantic

The EC Commission published a proposal for an agreement with Canada on fisheries in the North Atlantic.  A dispute between the EC and Canada developed in March of this year when Canada seized the Spanish fishing boat "Estai" in international waters just outside the 200-mile zone near Newfoundland.  The Canadian navy fired warning shots at Spanish vessels, and the Spanish dispatched its navy vessels for the protection of its fishing fleet.

The dispute began on February 1, when the North Atlantic Fisheries Organization (NAFO), which sets voluntary quotas for member states in international waters, granted Canada a 1995 quota for turbot (Greenland halibut) of 16,300 metric tons, while granting the EC only 3,200 tons.  Canada justified its stance as aiming to preserve the turbot in the overfished waters.  The EC nevertheless intended to catch up to 19,000 tons.

The Commission has come up with a proposal for an agreement to resolve the conflict, which may very well become a model for preserving common resources.  The agreement applies provisionally until December 31, 1995, or until adopted by NAFO, if that is earlier.  The agreement provides that the EC and Canada propose to the NAFO Fisheries Commission specific measures to improve fisheries control and enforcement. These include tonnage limits for catches of turbot, satellite tracking of fishing vessels and reports to NAFO of turbot catches at least every 48 hours.

Citation:  Proposal for a Council Decision on the conclusion of the Agreement on fisheries in the form of an agreed minute, an exchange of letters, an exchange of notes and the annexes thereto, between the European Community and the Government of Canada, 1995 Official Journal (C 239) 8, September 14, 1995.

GOVERNMENT PROCUREMENT

United States and Europe come to agreement on government procurement to ensure equal treatment of suppliers

The EC Council approved an agreement with the United States on government procurement to ensure equal treatment of suppliers of goods and services.  The agreement takes the form of an exchange of letters.

The letter of U.S. Trade Representative Mickey Kantor confirms, inter alia, that:

The U.S. and the EC have agreed to amend their respective Appendix I of the Government Procurement Agreement signed at Marrakesh on 15 April 1995 as set out in the attachments to the letters.

The U.S. shall grant to EC suppliers of goods and services, including construction services, treatment no less favorable than for out-of-state suppliers for the Massachusetts Port Authority and for the states of West Virginia, North Dakota and as regards Illinois for procurement not covered by the Government Procurement Agreement, and for out-of-city suppliers for the cities of Boston, Chicago, Dallas, Detroit, Indianapolis, Nashville and San Antonio.

The U.S. and the EC shall cooperate and take all necessary steps to improve substantially the transparency of the notices of intended procurement in order to ensure that contracts covered under the Government Procurement Agreement can clearly be identified as such.

The answer of Sir Leon Brittan, on behalf of the EC Commission, agrees that the Kantor letter, his reply and the attachments shall constitute an agreement.

 The Notes to the Annexes explain certain special requirements and exceptions.  For example, the agreement does not apply to procurement of construction-grade steel, motor vehicles and coal for certain state entities.  Nor does it deal with preferences and restrictions in programs for the development of distressed areas and businesses of minorities, veterans and women.

Citation:  Council Decision of 29 May 1995 concerning the conclusion of an Agreement in the form of exchange of letters between the European Community and the United States of America on government procurement, 1995 Official Journal (L 134) 25, June 20, 1995.

United States and Japan agree on opening up Medical Technology Procurement by Japanese government to American firms

In an exchange of letters on November 1, 1994, United States and Japanese officials reached an agreement designed to open up opportunities for American firms to sell their medical technology products and services to the Japanese government. Though Japan is a member of the GATT Government Procurement Code, a number of factors have limited foreign access to this market. For example, foreign firms have encountered great difficulty in taking part in earlier stages of procurement. Moreover, the tailoring of technical specifications to the advantage of Japanese manufacturers, and the awarding of many contracts to domestic suppliers without competitive bidding have put U.S. firms at a disadvantage.

The agreements aim to address these and other problems. Inter alia, the Letters set quantitative and qualitative criteria to assess the degree of progress, provide for nondiscriminatory, open and fair public sector procurement procedures, require a "national treatment" approach, and set up reporting, periodical review and complaint machinery. There is also a detailed list of central government departments and other entities covered by the new measures.

Citation: Japan-United States: Exchange of Letters Containing Medical Technology Procurement Agreement, 34 I.L.M. 78-101 (1995).

IMMIGRATION

Second Circuit holds that China's "one child" policy does not entitle Chinese citizen to asylum or to withholding of deportation

Xin-Chang Zhang arrived in the U.S. on board the smuggling ship "Golden Venture" that grounded on a Rockaway, Queens, beach. Zhang applied for asylum or withholding of deportation based on China's coercive family planning policies. The district court granted Zhang's petition for a writ of habeas corpus.

The U.S. Court of Appeals for the Second Circuit, however, reverses. It finds that Zhang's alleged fear of forced sterilization if returned to China is not enough to grant him asylum or withholding of deportation.

The Court points out that the President and Congress could make the necessary legal changes to implement a more favorable immigration policy for refugees under such circumstances.  The Court is not willing to remedy the deficiency by creating such a "political" rule.

Citation: Zhang v. Slattery, 55 F.3d 732 (2nd. Cir., 1995).

JUDGMENTS

Refusal to enforce Korean court order based on confession of judgment for lack of notice of execution of that order upon debtor's property is upheld in Third Circuit

Mr. Choi of Korea agreed to ship cash boxes to Mr. Kim, also a Korean, for sale in the United States.  Their arrangements included a confession-of-judgment provision and a "compulsory execution" clause allowing Choi to levy on Kim's property immediately upon default.  Kim did default and Choi got a Korean court order for execution against Kim's assets.  At this point, Kim fled from Korea and transferred his assets to third parties in New Jersey.  Choi then sued Kim and the transferees in the New Jersey federal court to enforce the Korean court's "judgment." The district court, however, gave summary judgment to Kim.

The U.S. Court of Appeals for the Third Circuit affirms. Assuming (without deciding) that the Korean court order constituted a "judgment," the Court points out that the FCN treaty between the United States and Korea [8 U.S.T. 2217] elevated Korean court judgments to the level of sister state judgments governed by full faith and credit standards. Noting that local state law on enforcement of foreign country judgments should govern in diversity cases, the Court reads New Jersey law as requiring its courts to deny enforcement to out-of-state judgments if the rendering court had failed to provide reasonable notice to the judgment debtor.  The Court holds that the Korean "judgment" fails because of a lack of notice to Kim of the execution order. New Jersey law generally honors clauses wherein debtors knowingly and voluntarily waive notice before issuance of the execution order. This is not the same, however, as pre-seizure notice. Moreover, in dispensing with notice as to debtors who are abroad, Korean procedure itself does not comport with American due process standards.

Citation: Choi v. Kim, 50 F.3d 244 (3rd Cir. 1995).

JUDICIAL ASSISTANCE

Under 28 U.S.C. §1782, Second Circuit reviews denial of discovery in United States requested by parties to French litigation

Two insurance firms engaged in an appeal of a $10,000,000 judgment in a civil action in the French courts won by Ralph Esmerian, Inc., a New York jewelry designer, sought a court order authorizing them to depose witnesses and obtain documents from Esmerian pursuant to 28 U.S.C. §1782.  A key issue in the litigation was whether the insurance firms had breached their duty of giving notice that a jewel courier was untrustworthy.  The courier had later made off with $26,000,000 worth of Esmerian's gems.

The district court declined to issue the order on the grounds that it would amount to an unwarranted intrusion into the powers of the French courts whose rules are relatively restrictive on the scope of discovery and place control of production of documents and witnesses in the court.  Thus, granting the requested order would allow the parties to engage in "American-style" discovery with detriment to the French procedures. 

In reversing for reconsideration, the Second Circuit, in a two-to-one split, holds that trial judges need not seek to delve deeply into foreign procedures or to demand that discovery under §1782 precisely match the degree of disclosures allowed under the law of the forum.  The goal of the statute is (1) to promote efficiency in international litigation and (2) to persuade other nations to do likewise. In the absence of a clear directive in forum law banning a particular type of discovery, American trial judges should not deny all relief merely because of procedural differences. If certain material obtained under §1782 turns out to be inadmissible under French law, the French courts are perfectly able to make that decision.

Citation: Euromepa S.A. v. R. Esmerian, Inc., 51 F.3d 1095 (2nd Cir. 1995).

Fifth Circuit rejects statutory and due process challenges to execution of letter rogatory from Venezuelan civil court pursuant to 28 U.S.C. §1782

A Venezuelan subsidiary of Electronic Data Systems Corporation (EDS) was litigating a labor dispute in a Venezuelan civil court against a Venezuelan national. The civil court issued a letter rogatory requesting that the U.S. District Court for the Northern District of Texas obtain testimony from EDS witnesses and authenticate designated EDS documents located there.

 The court-appointed commissioner issued subpoenas to three named witnesses and one to EDS's "custodian of records." EDS, however, filed a motion to modify or quash the subpoenas which the district court rejected.  On appeal, EDS first argued that the letter rogatory sought documents that were not "discoverable" under Venezuelan law. The U.S. Court of Appeals for the Fifth Circuit, however, notes the overwhelming federal authority holding that discoverability under the law of the requesting state is not a condition of granting judicial assistance under 28 U.S.C. §1782. Especially where the request comes directly from the foreign court, second-guessing the availability of the evidence under foreign law might jeopardize the spirit of international judicial cooperation and reciprocity that congress intended to advance in this statute.

Secondly, EDS complained that the request failed to satisfy American due process standards. The Court, however, rejects the notion that every foreign letter rogatory has to spell out specific questions to be put to the witness as recommended in 22 C.F.R 92.67(b). Moreover, the failure to designate a specific record custodian is not a problem since F.R.Civ.P. 30(b)(6) allows EDS to do the designating. The Court therefore affirms the judgment granting judicial assistance.

Citation: In re Letter Rogatory from the First Court of First Instance in Civil Matters, Caracas, Venezuela, 42 F.3d 308 (5th Cir. 1995).

JURISDICTION

Second Circuit enforces forum selection clause in cruise ship ticket

Nettie Effron suffered injuries during her South American vacation aboard the cruise ship Stella Solaris.  She had bought the travel package through her travel agent from Sun Line Cruises, a New York company.  The owner of the Stella Solaris is Sun Line Greece, a Greek business.  Effron sued both companies.

The companies moved to dismiss based on the forum selection clause on the back of the "Passenger ticket and contract."  It provided that "any action against the Carrier must be brought only before the courts of Athens[,] Greece to the jurisdiction of which the Passenger submits himself formally excluding the jurisdiction of all and other court or courts of any other country ..."  The district court denied the motion, and the U.S. Court of Appeals for the Second Circuit now reverses.  The Court explains that the legal effect of a forum-selection clause depends in the first instance upon whether its existence was reasonably communicated to the plaintiff.  The issue of reasonable notice is a question of law.  Here, the ticket resembled an airline ticket which has on its face "IMPORTANT NOTICE - READ BACK BEFORE ACCEPTING."  The Second Circuit has upheld provisions in passage contracts that were similar.

  The forum-selection clause does not violate notions of fundamental fairness.  For example, courts in the Southern District of New York have twice enforce contracts designating Greek courts as the exclusive forum.  A forum is not necessarily inconvenient because of its distance if it can be reached in a few hours of air travel.  Moreover, the Second Circuit is concerned more with a forum of contract than with convenience.  The costs and difficulties of suing in Greece do not satisfy The Bremen [inconvenience] standard.  The district court should have enforced this forum-selection clause.

Citation:  Effron v. Sun Line Cruises, Inc., No. 94-9279 (2nd Cir. September 11, 1995).

Ninth Circuit reverses contempt ruling against Luxembourg bank based on bank's violation of TRO and holds that issuing federal court lacked personal jurisdiction over bank

Reebok International Limited (RIL) filed suit in a California federal court against Byron McLaughlin for violating the Lanham Act by counterfeiting RIL's footwear. It also obtained a TRO to freeze various McLaughlin bank accounts including $2,400,000 in Banque Internationale à Luxembourg (BIL). BIL does no business in California or anywhere in the United States. RIL had a copy of the TRO served on BIL in Luxembourg but failed to register it in the Luxembourg courts to make the TRO enforceable under Luxembourg law. McLaughlin had also gotten an order from a Luxembourg court ordering BIL to release the funds to another McLaughlin corporation which it did. At RIL's request, the federal court held BIL in contempt and fixed compensatory sanctions at $2,680,000. BIL appealed, claiming lack of subject matter and personal jurisdiction. The U.S. Court of Appeals for the Ninth Circuit reverses on the grounds that the district court lacked personal jurisdiction over BIL.

The Court first rejects BIL's point on subject matter jurisdiction. It notes that it has applied the Lanham Act to activities occurring outside the United States and holds that the district court had subject matter jurisdiction over the enforcement of its own orders.  The Court does, however, find an absence of personal jurisdiction. Only specific jurisdiction applies here and BIL's actions to assist McLaughlin to evade the TRO all took place entirely in Luxembourg. Moreover, RIL had failed to make the TRO enforceable by registering it pursuant to Luxembourg law. In addition, that law imposed a duty upon its banks to surrender deposits upon demand and required BIL to keep its arrangements with McLaughlin secret. Finally, it would be unreasonable to find BIL contumacious for complying with local law and court orders rather than an unenforceable foreign TRO.

Citation: Reebok International Ltd. v. McLaughlin, 49 F.3d 1387 (9th Cir. 1995).

Ninth Circuit rules on federal jurisdiction over suit against Mexican domiciliary and on comity properly given to Mexican law banning foreign ownership of Mexican land

In 1969, Brady and Cardwell, two California investors, wanted to buy several thousand acres of Mexican coastal land on which to build a hotel. They soon found that it lay within a zone where Mexican law barred foreign ownership. Chester Brown, a U.S. citizen domiciled in Mexico, came up with a scheme whereby the investors could use Mexican citizens as straw parties to evade the Mexican Constitution. Through a complex series of manipulative transactions, however, Brown and his Mexican relatives ended up as owners of the land to the disadvantage of Brady and Cardwell. The latter sued Brown and his relatives under RICO with pendent California claims for fraud and constructive trust. After a bench trial, the judge gave judgment to Brady and Cardwell and ordered Brown to convey the title to the land to a bank trust acceptable to the Mexican government. Defendants appealed.

The U.S. Court of Appeals for the Ninth Circuit affirms the judgment based on state law, the RICO counts having been dismissed. The Court first points out that the presence of Chester Brown as defendant destroyed complete diversity, since he was neither a domiciliary nor a citizen of any American state nor was he an alien pursuant to 28 U.S.C. §1332. Nevertheless, the state law claims did arise out of the same nucleus of operative facts as the federal RICO claims. Though dismissed, these can serve as the basis for pendent federal jurisdiction over the state fraud and constructive trust claims. The Court also rejects appellants' arguments that the California courts would under the doctrine of comity apply the Mexican law making direct foreign ownership illegal and void. Unlike prior California precedents, this case involves a clear case of fraud upon a client. Moreover, the trust arrangement the trial judge ordered was not only sensitive to Mexican legal requirements but also calculated to recover the profits lost by plaintiffs as a result of defendants' wrongdoing.

Citation: Brady v. Brown, 51 F.3d 810 (9th Cir. 1995).

LITIGATION ISSUES

Term "habitual resident" under child abduction convention is defined by Third Circuit

In a case of first impression, the Third Circuit rules on a petition under the Hague Convention on the Civil Aspects of International Child Abduction.  The United States has implemented this Convention via the International Child Abduction Remedies Act, 42 U.S.C. §11601 et seq.

The marriage of two U.S. citizens, the Feders, fell apart after they moved to Australia.  Mrs. Feder returned to the U.S. with their son Charles.  Edward Feder alleged that Mrs. Feder "wrongfully retained" their son in the U.S., and requested his return to Australia.  The district court held that the U.S. was Charles' "habitual residence" under Article 3a of the Convention, and denied Feder's petition.  Edward appealed.

As to the meaning of "habitual resident," the Third Circuit declares that "a child's habitual residence is the place where he or she has been physically present for an amount of time sufficient for acclimatization and which has a 'degree of settled purpose' from the child's perspective." [14]  The Court finds that Australia is the place of Charles' "habitual residence" and that he was "wrongfully retained" within the meaning of the Convention.  Under the Convention, the conflict of law rules as well as the internal law of the child's habitual residence apply in determining a parent's custody rights (in this case Australia's Family Law Act of 1975). The Court remands to determine whether the exception of Article 13b of the Convention might apply.  It prevents the return of the child if it would expose him to a grave risk of psychological or physical harm or otherwise place him in an intolerable situation.

Citation:  Feder v. Evans-Feder, No. 94-2176, 64 U.S.L.W. 2106 (3rd Cir.  August 8, 1995).

Second Circuit sets measure of damages for injuries arising out of crash of international flight

On September 1, 1983, Soviet aircraft shot down KAL KE007 which had strayed into Soviet air space over the Sea of Japan, killing all 269 passengers. According to experts, the plane had remained airborne for about twelve minutes after being hit by missiles. In a suit in New York federal court pursuant to the Warsaw Convention, two relatives of a deceased passenger won a total jury verdict of $375,000 for loss of society, mental injury and grief, conscious pain and suffering and loss of support and inheritance. KAL appealed claiming that the Death on the High Seas Act (DOHSA) applied and it expressly limits recovery to pecuniary losses.

The Second Circuit affirms in part and reverses in part. It first notes that DOHSA did not apply but that federal judge-made maritime law governed the measure of damages in suits under the Warsaw Convention whether the incident occurred over land or water. Under federal law, the Court concludes (1) that maritime law allows damages for loss of society if claimant shows dependency, (2) that it does not allow additional damages for mental injury or grief; and (3) that it does not provide for loss of support and inheritance unless claimant proves dependency. 

Citation: Zicherman v. Korean Air Lines Co., Ltd., 43 F.3d 18 (2nd Cir. 1994), cert. granted, 63 U.S.L.W. 3745, 3753 (1995).

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

SOVEREIGN IMMUNITY

In District of Columbia Circuit, Court holds that agencies of State of Iran were engaged in commercial activities that had a direct effect in the United States under §1605 of the FSIA

After McKesson Corporation had for several years provided capital and expertise to support a dairy company operating in Iran (Pak Dairy), various agencies in Iran began to interfere with McKesson's investment. McKesson sued the Islamic Republic of Iran for damages under the Foreign Sovereign Immunities Act of 1976 (FSIA) alleging that Iran had effectively severed McKesson's financial links to Pak Dairy. Iran, however, had the matter referred to the Claims Commission set up by the 1981 Algiers Accords. The Commission awarded McKesson substantial contract and other damages.

In 1988, McKesson revived its FSIA suit claiming a subsequent expropriation. In a 1990 interlocutory appeal, the U.S. Court of Appeals for the District of Columbia Circuit held that Iran had acted "in connection with a commercial activity" with "substantial, foreseeable and direct effects" in the United States so as to support federal jurisdiction over Iran under FSIA §1605(a)(2).

On remand, the district court denied Iran's motions to dismiss for lack of jurisdiction and found that the interfering entities were agents of the Iranian government. Iran again appealed, claiming that the intervening Supreme Court opinion in Republic of Argentina v. Weltover, 504 U.S. 607 (1992) had undermined the circuit court's earlier interpretation of §1605(a)(2).

The Court affirms the FSIA rulings. Although Weltover had removed the requirements of showing that the effects were "substantial and foreseeable," it did not impair the Circuit's prior holding on directness, which thus remains the law of the case.

In addition, the Court finds that substantial evidence supported the trial judge's findings on agency. The state entities controlled Pak Dairy's board and, in light of the many anti-American actions of the Iranian government, the board had decided to stop paying dividends to any foreign shareholders including McKesson.

Citation: McKesson v. Islamic Republic of Iran, 311 U.S. App. D.C. 197, 52 F.3d 346 (1995).