Law School Outline- International Dispute Resolutiion Outline

INTERNATIONAL DISPUTE RESOLUTION I) Litigation A) Intro and Overview: Subject Matter Jurisdiction of U.S. Courts Over International Disputes 1) Alien Tort Statute (a) U.S. District Courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations (i) ATS has become significant as a means of allowing American government, military, and corporate leaders to be held responsible in a court of law for the human rights abuses committed as a result of their presence in a foreign country. This is regardless of whether the abuses were committed by someone within an American organization, or whether the abuses were committed by a local group empowered by the presence of the American organization. 2) Filartiga v. Pena, 1980 (a) Facts: (i) Paraguayan family sues Paraguayan military officer for the death of their son/brother  Brutally tortured, murdered, and left for dead at his home. Brought a claim of act of torture under color of authority. (b) Issue: (i) Does the Court have Subject Matter jurisdiction to hear this claim (c) Reasoning: (i) Personal jurisdiction  He was served while waiting to be deported in US (ii) Subject Matter jurisdiction  Under the ATS  For torture under the color of authority was found to be a violation of the law of nations (iii)Does the ATS deal with law of nations at time of enactment or now  Court found that the ATS does cover this crime, even though it may not have at the time of enactment  When Judge Kaufman tried to define law of nations he defined it as it currently stood at the time of the present opinion – so the law of nations at the time; it has changed and there is a dispute as to whether it should be defined in the present time or as it stood in 1789 (when constitution was drafted) (d) Comments: (i) It set the precedent for U.S. courts to punish non-U.S. citizens for tortious acts committed outside the U.S. that were in violation of the law of nations or US treaty. It thus extends the jurisdiction of United States courts to tortious acts committed around the world. 3) Tel-Oren v. Libya, 1984 (a) Facts: (i) PLO killed tourists in Israel, the Plaintiff’s were Israeli, Trial Judge dismissed for lack of jurisdiction (b) Issue: (i) Does the court have Subject Matter jurisdiction (c) Reasoning: (i) Separate Concurrences all finding against the plaintiffs  Edwards found there is Subject Matter Jurisdiction, but dismissed for separate reasons 1 (ii) Judge Edwards  Approved of Filartiga  He found that the ATS not only supplied subject matter jurisdiction, but also a cause of action ―a substantive violation of the law of nations‖  But made a factual distinction b/c the PLO was not a nation, so this action was in essence a private crime, not under the color of authority as in Filartiga 1. Torture/Murder under the color of authority (iii)Judge Bork  Finds that ATS supplies subject matter jurisdiction, but does not supply a cause of action  He follows ATS at enactment theory  He enumerates three offenses recognized by Blackstone for law of nations-violation of safe-conducts, infringement of the rights of ambassadors, and piracy 4) Sosa v. Alvarez, 2004 (a) Facts: (i) DEA approved for Sosa (Mexican) and others to kidnap Alvarez (Mexican) for the murder and torture of a DEA Agent, after Alvarez was acquitted he sued under the ATS (b) Issue: (i) Is there Subject Matter Jurisdiction and a Cause of Action? (c) Reasoning: (i) The court found there was Subject Matter Jurisdiction under the ATS because the ATS does provide jurisdiction (ii) But is there a cause of action under ATS?  While the jurisdictional scope of the ATS extended to recognition of limited claims for violations of the law of nations, the alien's brief illegal detention prior to his transfer to lawful authorities did not amount to a violation of a well defined norm of customary international law. (d) DISSENT: (i) Scalia  Federal Common Law is dead, see Erie  The Federal judiciary shall no longer create new causes of action  Congress has the authority to widen the scope of the ATS and has not  Contrast the Torture Victim’s Protection Act (created due to the ratification of the Convention against Torture), when Congress sees a need it will create an new Act (e) Comments: (i) The majority’s opinion left a narrow space for causes of action that do amount to a violation of customary law. The majority defined the In Violation against the Law of Nations as referring only to those crimes/violations that were recognized in 1789. The court held that it would accept new causes of action so long as those new causes of action were similar to the old ones. 5) Policy Issues (a) The ATS may interfere w/ the executive branch’s foreign relations (i) When the US was trying to broker a peace deal in the former Yugoslavia, and a civil case was brought in the US against a Serb official (b) Department of State will issue letters about potential effects on current foreign relations 2 (c) Territorial Sovereignty (i) ATS may be abrogating territorial sovereignty  Universal Human Rights v. territorial sovereignty B) Sovereign Immunity: Intro and History 1) Foreign Sovereign Immunities Act, 1976 (a) Affirmatively grants both Subject Matter Jurisdiction and Personal jurisdiction to federal courts in all those cases where a foreign state (or its agent) is denied immunity (i) Any nonjury civil action against a foreign state . . . as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement.  The FSIA does NOT generally deal with issues of substantive liability. (b) Application (i) D has the burden to show they are a foreign sovereign (ii) § 1603(a) defines a Foreign State to include each of the three entities:  (1) a ―foreign State‖—nation-states including those recognized by the USA;  US courts will defer to Executive branch recognition  (2) a ―political subdivisions of a foreign state‖—all governmental units beneath the central government, including local governments; and  (3) an ―agency or instrumentality of a foreign state‖—(a) which is a separate legal person, corporate or otherwise AND (b) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, AND (c) which is neither a citizen of a state of the USA nor created under the laws of any third country.  NOTE that the courts start with the presumption of separateness of the government and the agency or instrumentality  A separate legal person (Corp.) which is an organ of a gov’t or whose majority shares are owned by the foreign state  Courts will look at core operations, are they governmental or commercial  Degree of control by gov’t (iii) P then has to show immunity does not apply to a foreign state b/c an exception applies (iv) If an exception applies, the State will be treated as a private party  Exceptions to immunity: these exceptions (1) grant personal and (2) subject matter jurisdiction and (3) deny immunity.  Express or Implied Waiver: A foreign sovereign is amenable to jurisdiction if immunity is implicitly or explicitly waived  Express 1. Treaty, K w/ private party, Statement by an authorized official after a dispute arises  Implied 1. Fail to raise immunity in first pleading; agreement to arbitrate in another state; when agree the law of a 3rd state governs the K 2. NOTE that when a foreign state fails to appear it is NOT a waiver and the court will consider the immunity on the merits  Commercial activity w/in US or NEXUS of US:  ―Commercial Activity‖ is defined as EITHER a regular course of commercial conduct OR a particular commercial transaction or act. 1. The commercial character of an activity shall be determined by reference to the NATURE of the course of conduct or particular 3  transaction or act. An important factor is whether the activity is carried on for profit. 2. TEST: when a foreign sovereign acts as a private player with a market (and NOT as a regulator), the foreign sovereigns’ actions are ―commercial‖  NEXUS requirement: § 1605(a)(2)—Foreign state is NOT immune where P’s (i) action is based upon a commercial activity carried on in the USA by the foreign state; (ii) or upon an act performed in the United States in connection with a commercial activity of the foreign state; OR (iii) upon an act outside the territory of the USA in connection with a commercial activity of the foreign state elsewhere and that act causes a Direct Effect in the USA.  “Based Upon”—denoting conduct that forms the basis or foundation for a claim; the phrase calls for a determination of those elements of a claim that, if proven, would entitle a P to relief under his theory of the case (Nelson)  ―Commercial activity carried on” in the USA by a foreign sovereign state‖ defined as—commercial activity carried on by such state and having substantial contact with the USA.  Direct Effect—what is direct effect is handled on a cases by case basis. TEST: there is a direct effect in the USA of the act in question IF the effect followed as an immediate effect of the action. (Weltover) 1. Activities that have a direct effect in the USA: (1) commercial transactions made in whole or in part in the USA has a direct effect; (2) import or export transactions; (3) business torts occurring in the USA; (4) indebtedness incurred by foreign state in the USA. 2. Actions that are governmental and NOT commercial (that is, acts NOT having a direct effect): (1) providing security services to a royal family even if done through a private corporation; (2) development or extraction of natural resources (government is acting in relation to or within the sphere of its natural resources); (3) expropriation. Expropriation  Taking in violation of law 1. Expropriation: elements--P has to show (a) the rights in the property at issue; (b) that the property was taken—that is a taking; (c) that the taking was in violation of international law (there was no fair market compensation; and (d) the taker was a foreign government. 2. Expropriation exception does NOT apply to intangible property (e.g. bank accounts). See Nemarian  How the analysis is set up: 1. Rights in property that are in issue (has to be tangible property) 2. Unlawful expropriation (see elements above) 3. Jurisdictional nexus between expropriation and the USA (satisfy 3rd element in one of two ways): (1) Property in question could be present in the USA in connection with commercial activity carried on in USA by foreign state; OR (2) Property in question owned by instrumentality foreign state and the instrumentality is engaged in commercial activity in USA. 4. NOTE that in an expropriation action the P must NOT be a citizen of the D government 4 Non-commercial Torts committed in US—only applies to torts committed in US  Foreign sovereign is NOT immune where the tort occurred in US by foreign state or agent. 1. Exception: the foreign sovereign will be immune where the tort claim is based on discretionary action  Arbitration exception  Agreement to arbitrate w/ private party if it concerns a subject matter acknowledged  Terrorist nation  There is a list of terrorist states made by Sec. of State every year. States make the list: If the foreign terrorist state causes personal injury or death, hostage taking, high jacking OR the state provides materials or resources to other to do it. 1. (1) Need a bad sate, (2) the unlawful act and (3) the victim was a USA national when the act occurred. 2. The wrinkle is: after this was adopted Congress created a specific cause of action for these suits in the Flattou Amendment. 3. Flattou case (1998) arose form suicide bomber in Israel. An Islamic jihad group claimed responsibility and the Ps showed that the group was funded in a material way by a foreign state—Iran  Counter claims  If foreign state brings an action in USA court then the foreign state is NOT immune from a counterclaim arising out of the same transaction or occurrence that is the subject of the state’s claim. 2) Schooner v. McFadden, 1812 (a) Court held a French naval vessel immune from the jurisdiction of US courts, although no statutory or Constitutional provision granted jurisdictional immunity to foreign sovereigns. (i) Chief Justice Marshall applied the concept of comity  Respect another’s territorial sovereignty (ii) Thus adopting a common law rule for sovereign immunity 3) Tate Letter, 1950’s (a) When a case was brought against a foreign state or its agent, the Department of State would write a letter to the Court highlighting their opinion on whether there should be immunity (b) This led to the establishment of the FSIA, which sought to remove the subjectivity of the Tate Letters and set-up objective standards thus putting the decision back in the hands of the Court (i) However there is continued Dept of State involvement 4) Verlinden v. Central Bank of Nigeria, 1983 (a) Dutch company sued Nigerian Bank, Nigerian cement crisis, Nigeria ordered way to much cement and thus many lawsuits formed out of this crisis, when there was no money to pay (b) The District Court, while holding that the FSIA permitted actions by foreign plaintiffs, dismissed the action on the ground that none of the exceptions to sovereign immunity specified in the Act applied. (i) The Court of Appeals affirmed, but on the ground that the Act exceeded the scope of Art. III of the Constitution, which provides, in part, that the judicial power of the United States shall extend to "all Cases . . . arising under [the] Constitution, the Laws of the United States, and Treaties made . . . under their Authority," and to 5  "Controversies . . . between a State, or the Citizens thereof, and foreign States, Citizens, or Subjects."  The court held that neither the Diversity Clause nor the "Arising Under" Clause of Art. III is broad enough to support jurisdiction over actions by foreign plaintiffs against foreign sovereigns. (c) Reasoning: (i) Can a foreign P sue a foreign D under the FSIA?  Allows a foreign plaintiff to sue a foreign sovereign in federal court provided the substantive requirements of the Act are satisfied. The Act contains no indication of any limitation based on the plaintiff's citizenship. And, when considered as a whole, the legislative history reveals an intent not to limit jurisdiction under the Act to actions brought by American citizens. (ii) What is the scope of the FSIA?  For the most part, the Act codifies, as a matter of federal law, the restrictive theory of foreign sovereign immunity under which immunity is confined to suits involving the foreign sovereign's public acts and does not extend to cases arising out of its strictly commercial acts. (iii) Did Congress exceed scope of Art. III  Congress did not exceed the scope of Art. III by granting federal district courts Subject Matter Jurisdiction over certain civil actions by foreign plaintiffs against foreign sovereigns where the rule of decision may be provided by state law. While the Diversity Clause of Art. III is not broad enough to support such subject-matter jurisdiction, the "Arising Under" Clause is an appropriate basis for the statutory grant of jurisdiction. In enacting the Act, Congress expressly exercised its power to regulate foreign commerce, along with other specified Art. I powers. The Act does not merely concern access to the federal courts but rather governs the types of actions for which foreign sovereigns may be held liable in a federal court and codifies the standards governing foreign sovereign immunity as an aspect of substantive federal law. Thus, a suit against a foreign state under the Act necessarily involves application of a comprehensive body of substantive federal law, and hence "arises under" federal law within the meaning of Art. III. (d) Holding: (i) Since the Court of Appeals, in affirming the District Court, did not find it necessary to address the statutory question of whether the present action fell within any specified exception to foreign sovereign immunity, the court on remand must consider whether jurisdiction exists under the Act itself. 5) Texas Trading v. Nigeria (a) Facts: (i) Same crisis as Verlinden, (b) Reasoning: (i) Foreign gov’t had sufficient contacts to establish Personal jurisdiction (ii) Is the Nigerian gov’t conduct commercial?  Test  If a private person could do it, it would be commercial  Public v. Private Act  If gov’t goes into market place, they will be treated as a commercial activity, but if they are a regulator they will not (c) Holding: (i) Court found no immunity 6 6) Republic of Argentina v. Weltover 1992 (a) Facts: (i) As part of a plan to stabilize petitioner Argentina's currency, that country and petitioner bank (collectively Argentina) issued bonds, called "Bonods," which provided for repayment in United States dollars through transfer on the market in one of several locations, including New York City. Had to reschedule (ii) Respondent bondholders, two Panamanian corporations and a Swiss bank, declined to accept the rescheduling, and insisted on repayment in New York. When Argentina refused, respondents brought this breach-of-contract action in the District Court, which denied Argentina's motion to dismiss. (iii) The Court of Appeals affirmed, ruling that the District Court had jurisdiction under the FSIA, which subjects foreign states to suit in American courts for, inter alia, acts taken "in connection with a commercial activity" that have "a direct effect in the United States," 1605(a)(2). (b) Issue: (i) Does the FSIA apply? (c) Reasoning: (i) The issuance of the Bonods was a "commercial activity" under the FSIA, and the rescheduling of the maturity dates on those instruments was taken "in connection with" that activity within the meaning of 1605(a)(2). When a foreign government acts, not as a regulator of a market, but in the manner of a private player within that market, its actions are "commercial" within the meaning of the FSIA. Moreover, because 1603(d) provides that the commercial character of an act is to be determined by reference to its "nature," rather than its "purpose," the question is not whether the foreign government is acting with a profit motive or, instead, with the aim of fulfilling uniquely sovereign objectives. (ii) Rather, the issue is whether the government's particular actions (whatever the motive behind them) are the type of actions by which a private party engages in commerce. The Bonods are in almost all respects garden-variety debt instruments, and, even when they are considered in full context, there is nothing about their issuance that is not analogous to a private commercial transaction. The fact that they were created to help stabilize Argentina's currency is not a valid basis for distinguishing them from ordinary debt instruments, since, under 1603(d), it is irrelevant why Argentina participated in the bond market in the manner of a private actor. It matters only that it did so. (iii) The unilateral rescheduling of the Bonods had a "direct effect in the United States" within the meaning of 1605(a)(2). Respondents had designated their accounts in New York as the place of payment, and Argentina made some interest payments into those accounts before announcing that it was rescheduling the payments. Because New York was thus the place of performance for Argentina's ultimate contractual obligations, the rescheduling of those obligations necessarily had a "direct effect" in this country: Money that was supposed to have been delivered to a New York bank was not forthcoming. Argentina's suggestion that the "direct effect" requirement cannot be satisfied where the plaintiffs are all foreign corporations with no other connections to this country is untenable under Verlinden B.V. v. Central Bank of Nigeria. Moreover, assuming that a foreign state may be a "person" for purposes of the Due Process Clause of the Fifth Amendment, Argentina satisfied the "minimum contacts" test of International Shoe Co. v. Washington, by issuing negotiable debt instruments denominated in United States dollars and payable in New York and by appointing a financial agent in that city. (d) Holding: 7 (i) FSIA does not apply, b/c of exception to commercial activity, with a direct effect 7) Saudi Arabia v. Nelson, 1993 (a) Facts: (i) The respondents Nelson, a married couple, filed this action for damages against petitioners, the Kingdom of Saudi Arabia, a Saudi hospital, and the hospital's purchasing agent in the United States. They alleged, among other things, that respondent husband suffered personal injuries as a result of the Saudi Government's unlawful detention and torture of him and petitioners' negligent failure to warn him of the possibility of severe retaliatory action if he attempted to report on the job hazards. (ii) The Nelsons asserted jurisdiction under the FSIA which confers jurisdiction where an action is "based upon a commercial activity carried on in the United States by the foreign state." (iii) The District Court dismissed for lack of subject matter jurisdiction. The Court of Appeals reversed, concluding that respondent husband's recruitment and hiring were "commercial activities" upon which the Nelsons' action was "based" for purposes of §1605(a)(2). (b) Issue: (i) Was this a commercial activity carried on in US by SA (c) Reasoning: (i) This action is not "based upon" a commercial activity. Although the Act does not define "based upon," the phrase is most naturally read to mean those elements of a claim that, if proven, would entitle a plaintiff to relief under his theory of the case, and the statutory context confirms that the phrase requires something more than a mere connection with, or relation to, commercial activity. Even taking the Nelsons' allegations about respondent husband's recruitment and employment as true, those facts alone entitle the Nelsons to nothing under their theory of the case. While these arguably commercial activities may have led to the commission of the torts that allegedly injured the Nelsons, it is only those torts upon which their action is "based" for purposes of the Act. (ii) Petitioners' tortious conduct fails to qualify as "commercial activity" within the meaning of the Act. This Court has ruled that the Act largely codifies the so called "restrictive" theory of foreign sovereign immunity, Republic of Argentina v. Weltover, Inc., and that a state engages in commercial activity under that theory where it exercises only those powers that can also be exercised by private citizens, rather than those powers peculiar to sovereigns. The intentional conduct alleged here (the Saudi Government's wrongful arrest, imprisonment, and torture of Nelson) boils down to abuse of the power of the police. However monstrous such abuse undoubtedly may be, a foreign state's exercise of that power has long been understood for purposes of the restrictive theory as peculiarly sovereign in nature. The Nelsons' argument that respondent husband's mistreatment constituted retaliation for his reporting of safety violations, and was therefore commercial in character, does not alter the fact that the powers allegedly abused were those of police and penal officers. In any event, that argument goes to the purpose of petitioners' conduct, which the Act explicitly renders irrelevant to the determination of an activity's commercial character. (d) Holding: (i) The Nelsons' action is not "based upon a commercial activity" within the meaning of the first clause of §1605(a)(2), and the Act therefore confers no jurisdiction over their suit. II) Difference between FSIA (Foreign Sovereign Immunity) AND the Act of State Doctrine A) Foreign sovereign immunity: Question of Jurisdiction and cannot be waived 8 1) Concept: Gov’ts are immune from law suits in most cases. Foreign gov’t cannot be sued for a public act. 2) FSIA  A jurisdictional question. Who is the D? (a) The FSIA is a jurisdictional statute; if one of the exceptions does not apply and the D is a foreign sovereign then there is no jurisdiction. (b) FSIA can only be invoked by a foreign sovereign who is being sued. (c) FSIA applies to acts of foreign sovereigns that occur anywhere in the world (d) FSIA can be waived (e) FSIA cases can have both a foreign P and D B) Act of state Doctrine: is a prudential doctrine and a question of whether it is right for court to assert jurisdiction over case at hand. 1) Act of State Doctrine: Nation is sovereign within its own boarders and its actions within its boarders should not be questioned in court of another nation. It is a rule of self restraint. It is applied in many countries. Under this rule a USA could will usually decline to sit in judgment over foreign gov when action are taken within the territory of the sovereign 2) Act of State  More substantive – Whether it involves passing judgment on an act of a foreign gov’t. (a) Act of State comes into play after the court has jurisdiction (b) Act of state does not apply to acts by foreign officials which are not endorsed by the gov’t  Famous example  Police chief in Paraguay (c) Act of State can be invoked by government and non-government parties (i) Note that anyone can be a party to a case involving Act of State. The D does NOT have to be foreign government (d) Act of State doctrine can be used offensively. (e) Act of State doctrine only applies to acts of foreign sovereigns in their own territory (f) Act of State doctrine cannot be waived. A. Act of State Doctrine a. Overview i. Common law doctrine that limits the circumstances under which US courts will examine the validity of foreign govt acts ii. Act of State doctrine is a Prudential Doctrine (similar to political question doctrine) iii. Act of State Doctrine is relevant in ANY case where the validity of a foreign govt’s act, taken in its own territory, is at issue 1. Stems from customary intl law of territorial sovereignty iv. May arise even when the foreign govt is NOT a party (Unlike FSI issues arise ONLY in cases in which one of the parties is alleged to be a foreign govt or an agent or instrumentality of the govt) v. Reasons for doctrine 1. Protect territorial sovereignty 2. Protect executive branch prerogative in foreign affairs & avoid political channels being frustrated by judgments in US courts vi. Courts CANNOT use Act of State doctrine (1) to refuse to enforce an arbitral award; (2) to refuse confirmation of arbitral awards; and (3) to refuse to execute judgment from arbitral awards. vii. Began as Per Se Rule of Intl Comity & Reciprocity 1. Underhill v. Hernandez (SCt 1897): first SCt decision that relied on act of state doctrine; US living in Venezuela constructed waterworks system for city; revolutionary army seized control of city & refused to let Underhill 9 leave in order to coerce him to operate the waterworks system; eventually he was allowed to leave & he sued the commander for damages; SCt affirms dismissal stating that court will not sit in judgment on acts of another govt * b. Move from Per Se Rule to Balancing Test i. Balancing Test looks to 1. (1) Separation of Powers 2. (2) Competency of Courts 3. (3) Concreteness of the Intl law a. Greater the codification or consensus re: intl law the more appropriate it is for the ct to review b. Ct is reluctant to render decisions re: customary intl law c. If they do have to go customary, they like concrete rules 4. (4) Avoid Embarrassment 5. (5) Pragmatic factors a. whether foreign govt is still in existence; if doesn’t exist ct less likely to act b. whether foreign govt is recognized by US * ii. Act of State Doctrine is not mandated by Intl Law OR US Constitution; however, in absence of a treaty or unambiguous agreement, the Act of State doctrine may apply especially in areas of Intl law which are highly controversial & are currently being debated & could result in serious embarrassment to the Executive 1. Banco Nacional de Cuba v. Sabbatino (Sct 1964): FACTS a. Cuban govt nationalized company which US investors had an interest; b. US commodities broker who had contracted to purchase sugar from the company, entered into new agreement to buy sugar from Cuban govt; c. After gaining possession of sugar broker made payment to US investors, rather than Cuban govt; Banco Nacional de Cuba then sued in US court to obtain possession of funds; d. US broker defended on grounds that title to sugar never passed to Cuba b/c the expropriation violated customary intl law PROCEDURE e. Lower cts held that act of state doctrine did NOT apply b/c the taking violated intl law HOLDING f. SCt held that Act of State Doctrine did apply b/c adjudication of claim risked serious embarrassment to the executive branch b/c in the absence of a treaty or other unambiguous agreement re: controlling legal principles, intl law concerning compensation for expropriation was unclear i. * g. Sct Holds that US Const does NOT require Act of State Doctrine but it has ―constitutional underpinnings‖ giving 3 main policy reasons: i. Separation of powers doctrine 10 ii. Executive branch is best equipped to deal w/foreign policies iii. Action by court can be embarrassing or detrimental to executive branch’s foreign policy, especially when executive branch is acting on matter h. SCt also holds that Act of State doctrine is federal common law & that it is binding on US states & that it is NOT mandated by Const i. * Ct acknowledges that there are some enclaves of federal common law Post Erie such as labor relations law & act of state doctrine i. SCt holds that Intl law does NOT mandate Act of State doctrine & that it would not be violation if it determined that expropriation was invalid * 2. Categorizing Act of State doctrine as choice of law rule a. Choice of law rule: body of law that is used to determine what law is to be used in federal courts; act of state doctrine is merely one of those choice of law rules b. Here, Cuba decided that nationalization of sugar industry was something they need to do by taking govt action; govt action is the law in Cuba c. So if you apply the law of Cuba, then what Cuba did is not illegal, so there would be no violation B. Exceptions to Act of State Doctrine a. Exception when Congress So Directs i. RULE: US courts will not apply AOS doctrine when they are directed by Congress not to do so ii. 1st Hickenlooper Amendment: 1. Adopted in 1965 in response to Sabbatino case; reversed Sct decision in Sabbatino; statutory language says the US courts shall not decline to reach a decision on the merits on the ground of the act of state doctrine in expropriation claims where the taking took place during and after 1/1/59 where expropriation was in violation of intl law; lower court on remand in Sabbatino case found Cuba govt’s expropriation was violation 2. 2 exceptions to Hickenlooper Amendment: (1) cases were President determines that application of Act of State doctrine is required by foreign policy interest of US and files suggestion to court to that effect (2) act of foreign state is not contrary to intl law or w/respect to claim of title or claim of property acquired in pursuant to irrevocable credit prior to confiscation 3. One question that has arisen in Hickenlooper Amendment is definition of property: does it apply to real property or personal property a. some limited to personal property physically located in US (in Sabbatino it would have been funds); b. so this excludes land, which leaves out a huge chuck of what foreign investors care about c. so this is source of controversy iii. 2nd example is Federal Arbitration Act: Congress has directed courts not to apply AOS in 3 circumstances: 1. (1) to refuse the enforcement of arbitral agreements (this could also be seen as treaty exception) 11 2. (2) to refuse confirm arbitral awards 3. (3) to refuse to execute upon judgments based on orders confirming arbitral awards iv. 3rd example of Congress stepping in: some examples where there is an implicit instruction in statute – this is minority view b. Exception when State Dept so Advises – Bernstein exception: State Department says that the AOS doctrine should not apply to a case i. Arises from 1947 Bernstein case involving claim by Jewish businessman to recover property seized during WWII by Nazi regime; where on appeal the ct held that the AOS doctrine did NOT apply b/c the State Dept had submitted letter expressing that US cts exercise jxs, that AOS need not apply ii. State dept maintains active role – if you are P you want to lobby state dept to say that the AOS should NOT apply iii. Unclear whether Bernstein exception has been fully accepted by SCt iv. First Natl City Bank v. Banco Nacional de Cuba (1972): while a majority of justices found act of state doctrine inapplicable, only a minority was willing to recognize the Bernstein exception (State Dept wrote to Ct that the act need not apply) & regard the executive’s statement as conclusive on the matter v. Lower court levels still use c. Treaty Exception i. AOS doctrine not applicable where consensus on the law exists in the form of a treaty ii. Kalamazoo Spice Extraction Co. v Ethiopia (6th Cir 1984): State dept wrote a letter stating ―when, as in this case, there is a controlling legal standard for compensation (FCN Treaty), we believe that adjudication would not be inconsistent w/foreign policy interests under the Act of State doctrine‖; 6th cir accepted the position; however, it is not clear whether cts will apply this ―treaty exception‖ w/out first receiving govt’s position * d. Exception for Extraterritorial Govt Action i. AOS does not apply where foreign govt seeks to affect/or its actions affect property located outside its territory * e. Exception for Commercial Activities i. Alfred Dunhill of London v. Cuba (1976): 3 justices argued that the AOS did not apply to a Foreign Sovereign commercial acts, even though those acts were done w/in its own territory; AOS doctrine would only apply if US jxs over conduct is limited by intl principles ii. What constitutes public or commercial act is difficult to define; but as a practical matter, the further you get away from govt role the closer you are to commercial act * f. Exception where Validity of Act is Not in Question i. W.S. Kirkpatrick v. Environmental Tectonics Corp (Sct 1990): 1. P was an unsuccessful bidder on a contract w/govt of Nigeria; D, successful bidder, allegedly bribed a Nigerian govt official to get contract, in violation of US (& Nigerian) law; 12 2. SCt declined to apply the Act of State doctrine stating that the question before it was not whether to ―declare invalid the official act of a foreign sovereign performed w/in its own territory‖ rather the issue was whether an unlawful motivation could be imputed to a foreign official in the performance of his duties so as to satisfy US requirements for a civil recovery by the P.* 3. Act of state issue ONLY arise when a court MUST DECIDE – that is when the outcome of the case turns upon – the effect of official action by a foreign sovereign; 4. Act of State doctrine does NOT establish an exception for cases & controversies that may embarrass foreign governments, but merely requires that, in the process of deciding, the acts of foreign sovereigns taken w/in their own jxs shall be deemed valid. 5. Validity of Act itself is not in question just whether the official had motivation to accept bribe 6. Source of AOS doctrine here is choice of law g. Exception for Counterclaims i. If Foreign govt has brought claim to US courts it cannot invoke AOS for any subsequent counterclaims 1. Another example: Foreign sovereign brings claim in US court and USA citizen brings counterclaim, the foreign sovereign cannot raise AOS ii. First Natl City Bank v Banco Nacional de Cuba: Foreign gov filed claim, US national counterclaimed; Fgov raised AOS doctrine as defense to counterclaim; SCt declined to apply doctrine stating that once foreign govt has availed itself to US courts, it cannot invoke Act of State doctrine for counterclaim h. Exception for Human Rights i. US courts usually do not apply the act of state doctrine to dismiss cases alleging human rights violations by a Foreign government in its territory 1. Ex: in enacting TVPA, Congressional committee indicated that it did not intend the Act of State Doctrine to apply to such claims—those under the TVPA C. CHOICE OF FORUM: Forum Non Conveniens in International Litigation (Jurisdictional Issue) a. Overview i. Court may decline to exercise Jurisdiction b/c a more convenient alternative forum exists ii. FNC is a question of convenience for both the parties & the court as an institution iii. FNC can be used by D foreign State to avoid adjudication in US courts 1. Even if ct has both personal & Subject Matter Jurisdiction, and even if Act of State Doctrine does not apply iv. FNC can apply even when there is a choice of forum clause b/w parties v. FNC is a common law doctrine (unlike domestic FNC where there is a statutory basis) vi. FNC Can be applied to any type of case – whether Antitrust or Alien Tort vii. Sct affirmed the FNC doctrine in 2 companion cases (Gilbert & Koster) where Sct outlined the foundational analysis for FNC 1. Presumption in favor of P’s choice of forum; should only rarely be disturbed for compelling circumstances 13 2. (1) Whether an adequate alternative forum exists 3. (2) Balancing Test: to balance private interests of parties & public interest to determine whether trial in forum would be vexing out of proportionate to P’s convenience viii. Sct used the Gilbert & Koster principles in an international context with Piper v. Reyno (1981) ix. As a matter of practicalities, the globalization of trade has placed pressure on both sides of doctrine 1. One hand, more intl disputes w/ct proceedings in different forums w/different rules 2. Other hand, reduced burdens & inconveniences of intl litigation (ease of travel, harmonization of economy & law, technology, digitization) x. As a rule, US courts are sensitive that our courts are attractive for foreign litigation 1. Most US states allow for strict liability 2. Most major corporations have presence & assets here 3. Forum shopping among 50 states for tort claims 4. Availability of jury trials (in civil cases, jury trials are not available) 5. Contingency fees (attys will take work & parties don’t have to pay until they win) and US courts in most cases do not tax losing party (in UK they do) 6. Availability of broad discovery in US; significantly more broad than in other foreign jxs b. Analysis i. RULE: Strong Presumption in favor of Ps choice of forum; should only rarely be disturbed for compelling circumstances ii. (1) Is there an Adequate Alternative Forum? 1. Adequacy of remedy: minimum remedy a. Whether remedy is so clearly inadequate that it is no remedy at all i. Nemarian: Ct held that a forum where P can NOT get direct remedy is like no remedy & therefore inadequate b. Very fact & case dependent c. Fact that remedy is less generous or procedure is more onerous is not enough i. Bhopal: Fact that Indian court process may be more onerous was NOT enough; Ct dismissed case on FNC b/c Indian courts were capable 2. Whether the statute of limitations has expired? 3. Whether the foreign court lacks subject matter or personal jurisdiction? a. Waiver of jurisdiction defenses can be made a condition to dismissal b. But even if waived a foreign court may not accept the waiver (?) 4. Integrity or impartiality of foreign court a. Suspicious of corruption or bias for national b. Fairness of judicial proceedings c. Operations of court d. Security e. Lack of resources f. Substantial delay 14 iii. (2) Whether balance of private & public interests substantially favors the foreign forum? D has burden to show that weight tips heavily in favor of foreign forum 1. Private Interest factors a. Ease of access to sources of proof b. Availability of compulsory process for unwilling witnesses c. Ease of enforceability of judgment d. Whether there is a choice of forum clause i. If there is a clause & it designates a foreign forum it might support dismissal e. Availability of discovery, jury trial, taxation, compensatory damages f. P’s nationality i. Non-US national P deserves less deference than US national ii. This is not decisive g. Whether or not the foreign law is less favorable to the P i. In Piper, ct said that it can be dismissed even if less favorable ii. Not decisive factor iii. Foreign remedy must be so insufficient as to deprive the P his day in court 2. Public Interest factors a. Burden on US courts & court congestion b. Local interest of having local controversies decided locally c. Comparative relative interest in having own courts allowed to adjudicate the dispute d. Need for US court to apply foreign law i. Interest favors having the trial be in a court that is familiar w/law that applies ii. But this is not decisive e. Avoidance of conflict in conflict of laws analysis f. Unfairness of burdening US citizens to jury duty in a dispute that doesn’t relate to them iv. Conditions for dismissal: the court will sometimes place conditions that D must agree to in order for dismissal to take place 1. Conditions that are typically upheld a. Consenting to service of process b. Consenting to personal jxs of foreign court c. Waiving statute of limitation or other technical defenses 2. Controversial conditions a. Producing documents or witnesses b. Requirement to consent in advance to pay any judgments of foreign courts i. Bhopal: appellate ct threw out 2 conditions, (1) didn’t like discovery condition b/c they saw it as intrusive and (2) didn’t like agreement to pay damages b/c that short circuits process that US cts have in foreign judgments c. Piper Aircraft Co v Reyno (Sct 1981) 15 i. F: airplane crash in Scotland of several Scottish citizens; P is representative of the deceased estates & brings wrongful death action against Piper Aircraft (manufactured in PA, propellers in OH, registered in UK, operated by Scottish air taxi service, & wreckage of plane in England) 1. no eyewitnesses to accident 2. preliminary report found that mechanical failure in plane or propeller was responsible; Review board found no evidence of defective equipment & indicated pilot error may have contributed to accident 3. P admits that action was filed in US b/c laws re: liability are more favorable to her position than Scotland (Scottish law doesn’t recognize SL & only permits decedent’s relatives to bring wrongful death suits) ii. Trial (DC): granted motion to dismiss on ground of FNC; relying on balancing test of Gilbert & Koster iii. Ct of Appeals: reversed holding that DC abused its discretion in conducting Gilbert analysis and dismissal is never appropriate where the law of alternative forum is less favorable to the P iv. HOLDING: Sct Reversed – DC properly balanced the factors in dismissing on grounds of FNC, thus reversing Ct of Appeals judgment v. Substantive law that would be less favorable to P is NOT given conclusive or even substantial weight in FNC inquiry. 1. Reasoning: placing emphasis on one factor would lose the flexibility that makes FNC so valuable; 2. Also poses practical problems w/this particular factor b/c it would require cts to go thru detailed & fact specific choice of law analysis at a motion to dismiss stage – which is in part why FNC is designed to avoid cts from having to conduct such complex analysis 3. Also concerned w/opening of floodgates from foreign Ps suing in US cts & further congesting already crowded courts vi. Standard of review is clear abuse of discretion: Appellate courts given great deference to trial courts in their FNC determination 1. Reasoning: while there is a presumption towards P, it applies w/less force when the P or real parties in interest are foreign 2. DC did not act unreasonable when it concluded that Private interests pointed towards trial in Scotland a. Even while P would have greater access to sources of proof if trial held in US – records concerning design, mfg, & testing of propeller & plane located in US b. Fewer evidentiary problems would be posed if trial were held in Scotland b/c large proportion of relevant evidence is located in UK c. Also it is NOT necessary for D seeking FNC to provide detailed info, such as affidavits identifying witnesses that would be called & testimonies that would be provided if held in alternative forum; D just needs to provide sufficient information to allow DC to balance parties interest d. Finally, the DC correctly concluded that the problems posed by the inability to implead potential 3rd party Ds clearly supported holding the trial in Scotland 3. DC balancing of Public Interests were also reasonable a. Noting the confusion to the jury involving 2 sets of laws (US & Scottish law) 16 b. Also, the lack of familiarity w/Scottish law c. Scotland has very strong interest in this litigation b/c apart from Piper & Hartzell, all potential Ps & Ds are either Scottish or English d. American interest in this accident is simply not sufficient to justify the enormous commitment of judicial time & resources of trying the case here in US d. Harrison v. Wyeth Laboratories (E.D. Pa 1980) i. FACTS: Ps are all citizens & residents of UK; purchase oral contraceptives in UK & suffer injury, damages, and/or death; ii. P allege D (whose has principal place of business in PA) is engaged in development, testing, mfg, production, sale, marketing of product & was negligent in its failure to give reasonable or adequate warning concerning serious risk of which it had knowledge iii. ANALYSIS iv. Private Factors: 1. Activities took place in UK; Witnesses & documents in UK a. D argues that activities complained of did not occur in PA & PA has no legitimate interest in regulating conduct of its citizens beyond its borders b. P argues that tortious conduct consisted of marketing drugs & placing them in stream of commerce w/knowledge of risk involved; these activities occurred in PA & PA has interest w/conduct that occurs w/in & which may cause harm regardless of where the harm occurred 2. Fairness to D: D’s conduct should be judged by the standards of community affected by its actions; D claims to have complied w/British drug safety & warning standards v. Public Factors: 1. UK has their own drug & safety regulations; questions as to the safety of drugs marketed in a foreign country are properly the concern of that country, US cts are ill-equipped to set standard of product safety for drugs sold in other countries 2. UK is similar to US but what if it was India; would not be appropriate to impose our standards onto them given the differences in standard of living, wealth, resources, health care & services, values, morals 3. Choice of law: clear that applicable law would be that of UK vi. HOLDING: The local interest of having this localized issued decided at home is strong; vii. FNC Dismissal w/Conditions: 1. D must submit to jxs of UK 2. D must make available documents & witnesses that may be located in PA 3. D must agree to pay any judgment rendered against D in the UK e. In re Union Carbide at Bhopal, India (SDNY 1986) i. FACTS: tragic industrial disaster where highly toxic gas leaked from a chemical plant (incorporated in India under India law; 50.9% owned by D, NY corporation) in which prevailing winds blew it into adjacent overpopulated part of city which resulted in over 2,100 deaths & 200,000 injuries ii. P argues that India courts would NOT offer Adequate Forum 17 1. India system is inadequate to handle this type of litigation – lack of legislative activity, inaccessibility of legal information & legal services, burdensome court filing fees, & limited innovativeness w/reference to legal practice & education 2. Problems of delay & backlog in Indian courts a. Ct notes this is problem for US courts too 3. Legal system lacks wherewithal to allow it to deal effectively & expeditiously w/issues a. Ct not convinced that size of law firm has much to do w/quality of legal service provided 4. India lacks codified tort law & little reported tort case law 5. India lacks adequate discovery a. Ct places condition on this upon dismissal 6. Unavailability of jury trials or contingent fees a. Ct notes these are easily disposed of b/c these are not found in most foreign jxs 7. Difficulty of enforcing Indian judgment a. Ct places condition on this upon dismissal iii. Private/Public Factors 1. access to witnesses, view of the plant, records of design of plant, operations of plant, etc were mainly all in India 2. issue of compulsory process: inability to force witnesses to US & cost of bringing them to US 3. issue of language a. Private factor: some witnesses will not be able to speak English b. Public factor: delay caused by translation 4. Public factor: Applying Standards of Care w/respect to laws of India v. laws of US; like Wyeth iv. HOLDING: Ct dismisses on FNC grounds w/Conditions 1. D consent to jurisdiction of foreign court 2. D consent to broad discovery as afforded by fed rules of civ pro a. This was reversed on Appeal 3. D consent to be bound by judgment a. This was reversed on Appeal f. Nemarian v. Ethiopia (DC Cir 2003): Forum where P can NOT get direct award is NOT an adequate forum i. FACTS: Ethiopian citizen (Eritrean descent) claimed that Ethiopia expelled her during a border war with Eritrea and confiscated property she left behind. ii. PROCEDURE: Trial ct found that the Ethiopia/Eritrea Claims Commission created by the Cessation of Hostilities Agreement was a more appropriate forum. iii. HOLDING: Appellate ct held that FNC dismissal was inappropriate & reversed iv. REASONING: 1. Only Ethiopia & Eritrea were allowed to appear before the Commission; they could file claims on behalf of persons of Ethiopian and Eritrean origin who might not be their nationals. 2. Thus even if the Ethiopian citizen had a valid claim, she had no personal right to a remedy from the Commission. 3. Also, there was a possibility that Eritrea could set off her claims or an award in her favor against claims by or an award in favor of Ethiopia. 18 a. Eritrean statement that it believed awards should go directly to claimants was insufficient to establish that a remedy would be available. 4. The situation differed from circumstances where another forum might offer a more limited remedy because the Commission could make no direct award at all. g. Wiwa v. Royal Dutch Petroleum (2d Cir 2000): i. FACTS: Ps, Nigerian emigrees, suit under the ATCA against Ds, foreign corporations, alleged to have participated with the Nigerian government in human rights violations committed in Nigeria. ii. PROCEDURE: Trial Ct dismissed on FNC grounds iii. HOLDING: Reversed, Ct erred in dismissing on FNC grounds iv. REASONING: 1. Inconvenience to Ds involved in litigating in NY would not be great a. Alternative forum was in UK b. Minimal difference b/w UK & NY re expense & inconvenience 2. Thus ct failed to give proper consideration to the choice of a US forum by US resident Ps & to the interests of the US in providing a forum for the adjudication of claims alleging human rights abuses D. RECOGNITION & ENFORCEMENT OF FOREIGN JUDGMENTS a. Overview  Recognition: when a court will NOT re-litigate an issue already litigated abroad; like res judicata  Enforcement: coercive power of the court to have D satisfy the foreign judgment  May not always be the D that wants to block the enforcement; could be that the P wants to re-litigate the claim especially if in forum they could not obtain damages or if they lost in foreign forum  Most courts will enforce their own money judgments w/in their territorial jurisdiction based on territorial sovereignty (states have sovereignty w/in their own borders but that sovereignty stops at the border)  Foreign courts judgment will be enforced only if home state’s court are willing to recognize that judgment  Exceptions o Where there is Treaty b/w states o Reasons of comity that they will give foreign judgment effect  Analogy b/w sister state judgments: full faith and credit clause of US constitution applies and requires states courts to enforce judgments of sister state courts with some exceptions o judgment rendered w/out personal or subject matter jxs o D did not receive adequate notice or opportunity to be heard o state judgment obtained by fraud  Distinction: Recognition or enforcement of a sister state judgment is required even where the underlying claim is contrary to the public policy of the state where enforcement is sought  Policy rationale under full faith and credit clause: concept of federalism that courts were trying to promote national unity and minimize inconsistent decisions 19 b. Foreign Judgments  (1) Courts will first turn to express law; i.e. Treaty in place;  (2) If no express law then, Federal Statute: but there is no federal statute except for FSIA  (3) First issue they look to is to determine whether they are going to apply federal common law or state law o Majority approach is that state law will apply  State common law: Hilton Standard (see below) OR  State statute: many states have adopted their own version of Uniform Foreign Money Judgments Recognition Act (UFMJRA), which is modeled largely on Hilton’s standards o Minority of courts have held there is federal common law that can apply  British Columbia case is example: b/c of foreign relations overtures involved court did not want to be limited to state law; also b/c there wasn’t state law on issue  Distinction: this is not where parties have gone to intl arbitration; doesn’t have to do w/enforcement of arbitral awards – that is governed by treaty and law  At the moment, there is no multilateral treaty for recognition of foreign judgments, however, US is party to Hague Conference of Intl law and leading member of group w/in conference trying to finalize recognition of civil court judgments given by other contracting states c. Hilton Standard: Common law of foreign judgments i. Presumption: US court will enforce foreign judgment so long as: 1. Opportunity for full & fair trial 2. Trial before a court of competent jxs (both personal & subj matter) 3. Trial concluded after notice to the D or voluntary appearance of the D 4. Foreign court has system of jurisprudence that was likely to result in impartial justice involving foreign citizens 5. No evidence of prejudice or fraud 6. No other special reason that comity should not allow enforcement ii. Under the Common Law a court will refuse to enforce a foreign judgment IF: 1. There was insufficient/lack of notice 2. Foreign court lacked Personal Jurisdiction 3. Foreign court lacked Subject Matter jurisdiction 4. There was fraud 5. There was biased or unfair proceedings iii. Hilton v Guyot (1885) 1. French citizen sought to enforce French judgment against 2 NY residents arising out of New Yorkers’ business in France 2. Sct found no direct applicable federal law, so turned to intl law (citing Paquete Habana rule that intl law is part of our law) 3. Sct found presumption in favor of enforcement b/c of intl comity; not as a doctrine of absolute duty or obligation but as a matter of curtesy & good will 4. Based upon this principle of comity, Hilton fashioned a rule of general common law governing when US federal courts should enforce foreign judgments 20 5. Sct rejected the earlier approach that foreign judgment was merely evidence (used to be treated of prima facie evidence and not preclude re-litigation) rather than conclusive of D’s liability 6. Reciprocity requirement: Sct found that reciprocity requirement had become principle of intl law and therefore, b/c there was no reciprocity b/w US and France, the Sct refused the enforcement of the decision 7. Status of reciprocity requirement now: a. Majority approach: REJECTS the Reciprocity Rule b/c Hilton decided before Erie and the rule is limited to pre-Erie; b. NY courts have expressly rejected reciprocity requirement and CA has passed statute; c. some courts have not gone that far – they have just limited its scope d. some courts still in minority rule (federal courts in FL) e. comparing this to enforcement of arbitral awards under NY convention; NY convention allows for states to use reciprocal rule by making declaration under treaty (US has done so) f. Hilton standard is similar to Restatement (Second) Conflict of Laws (1971) – p. 948 g. UFMJRA Act does NOT include reciprocity d. Uniform Foreign Money Judgments Recognition Act (UFMJRA): based closely on Hilton; codifies existing US case law concerning recognition of foreign judgments; does NOT have a reciprocity requirement i. RULE: Presumptively entitled to recognition if they are ―final and conclusive and enforceable where rendered even though an appeal therefrom is pending or it is subject to an appeal‖ ii. Exceptions to general enforceability 1. Mandatory Exceptions: Grounds which forbid US court from enforcing a foreign judgment: (1) unfair foreign courts (2) lack of personal jurisdiction (3) lack of subject matter jurisdiction 2. Permissive exceptions: Ground that permit BUT do not require denial of foreign judgment: (1) lack of notice, (2) fraud, (3) public policy, (4) existence of an inconsistent judgment, (5) violation of forum selection clause, and (6) inconvenient forum e. Default Judgments i. Cases where foreign D did not participate, they defaulted, several times parties have argued that if you waive your right then you should not object to enforcement – US courts have disagreed ii. England has taken different approach: only where D was present in foreign state at time litigation initiated or if D appeared or agreed via contract f. Requirement of final judgment i. judgments have to be final and binding in foreign; but does not mean that there can’t be appeals pending g. Other foreign states’ practice i. this is not uniform area ii. Germany has strict reciprocity requirement 21 iii. Brussels Convention: equivalent b/w EU member states of full faith credit clause of US and limited to civil court judgments; exceptions 1. Public policy 2. Absence of proper service of process or opportunity to defend 3. Conflicts w/earlier final judgments 4. Does not apply to marital status, succession, mental capacity, and immigration status h. Revenue Rule: US will NOT enforce tax or penal judgments of foreign states i. Her Majesty BC v. Gilbertson (9th Cir 1979) ii. Americans who didn’t pay Canadian taxes on lumber; Canada tried to collect taxes from them in Oregon DC iii. Didn’t matter whether state or federal law applied b/c it would result in same conclusion b/c of Revenue Rule: US will not enforce tax judgments of foreign states iv. Reason for Revenue Rule (citing Judge Learned Hand) 1. If you have US court trying to enforce foreign state judgment; possibility that US court will be scrutinizing public policy of foreign state and whether that it is consistent w/US and if different there will be a conflict 2. Could cause embarrassment to foreign state v. Here there were 2 tax treaties b/w US & Canadian govt but court did not find any enforcement power in either one; 1. Court said political branches could have made exception to revenue rule when they entered into the treaties but they did not do so vi. Notes 1. As taxes are becoming more uniform in modern times revenue rule is losing some favor 2. 3rd Restatement of Foreign Relations: US courts are not required to recognize revenue foreign judgment but are not prohibited of doing so 3. Friendship, Commerce, and Navigations treaties: National treatment provision (US agrees that Canadian nationals treated same as US nationals in the US); doesn’t say that they will recognize judgments; some courts have held that FCN should be treated like full faith and credit clause i. Adequate Notice Exception: Under common law Hilton standard & UFMJRA, a court does not have to enforce a judgment where there was no adequate notice i. Ackerman v. Levine (2d Cir 1986): ii. German lawyer sued US businessman (Levine) in German courts for alleged services provided to Levine; Levine defaulted & Ackerman obtained a substantial judgment which he sought to enforce in US; Levine challenged on grounds that he did not receive adequate notice iii. Issue #1: whether service of summons & complaint by registered mail provided Levine w/adequate notice iv. Procedure: Trial ct held that it was improper service, so no enforcement v. HOLDING: Service of process did not violate Hague Convention or Constitutional Due process vi. REASONING: that Hague Convention as ratified treaty is supreme law of the land & since US did not make objection to use of ―postal channels‖ under Hague Article, service of process by registered mail remains an appropriate method of service 22 vii. 2nd issue dealt with Public policy j. Public Policy Exception: US court need not recognize a foreign judgment that is contrary to the forum’s ―public policy‖ i. Ackerman v. Levine (2d Cir 1986): 1. 2nd Issue: whether foreign judgment was contrary to public policy of NY 2. Procedure: Lower ct refused to enforce entire judgment b/c undisputed fact that attorney never discussed fees with Levine would violate a NY public policy that attorneys seeking recovery of fees bear the burden of proving that a compensation arrangement is fair, reasonable & fully comprehended by the client 3. Holding: Ct invokes public policy exception to deny partial enforcement to German judgment based on a statutory claim for attorneys’ fees 4. Analysis: 5. Ct takes narrow approach to public policy exception: Judgment is against public policy if it ―tends clearly‖ to undermine a. The public interest; OR b. The public confidence in the administration of the law OR c. Security for individual rights of personal liberty or of private property 6. stating that narrowness of public policy exception indicates a jurisprudential compromise b/w 2 guiding but sometimes conflicting principles in the law of recognition & enforcement of foreign judgments: (1) res judicata and (2) fairness regarding the underlying transaction 7. Ct appeal said what needed to be established (1) existence of authorization by the client for the attorney to perform the work allegedly performed (2) evidence that work was performed 8. Without these Evidentiary predicates there is a grave risk that US courts could become means of enforcing unconscionable atty fee awards, thereby endangering ―public confidence‖ in the administration of the law and a ―sense of security for individual rights…of private property‖ 9. Applying this standard ct dismissed a portion of it – work on deals where there was no evidence that client approved that part of the work and no evidence that work was performed on that portion ii. Bachchan v India Abroad Publications (Sct of NY 1992): 1. Judgment granted in London by an Indian national against NY operator of news service which transmits reports only to news service in India 2. Wire service story transmitted by D stated that a Swedish daily newspaper reported that Swiss authorities had frozen an account belonging to P to which money was transferred from an arms company, which had been charged w/paying kickbacks to obtain large munitions contract w/Indian govt 3. D argues that enforcement should not be recognized b/c it was against public policy – it was imposed w/out safeguards for freedom of speech & press required by 1st Amendment 4. P argues that standards of libel in England should not be compared to standards for libel in NY; what courts should say is that there is a cause of action for libel in both NY & England & therefore, no conflict w/public policy 23 5. Holding: Ct denies enforcement to an English judgment for libel b/c the English court unconstitutionally and with chilling effect placed the burden of proving truth upon the media defendants who published speech of public concern 6. Ct defines distinction b/w laws was on burden of proof a. In US, burden would have been on P and P would be forced to prove media was grossly irresponsible b/c it involve a public interest 7. Law underlying this is 1st Amendment and underlying policy is ―chilling effect‖ on media 8. Not a matter of discretion b/c US constitutional standards are mandatory INTERNATIONAL COMMERCIAL ARBITRATION OVERVIEW 1. International arbitration is a preferred method of dispute resolution in international transactions. Usually the agreement to arbitrate will be in an arbitration clause of the K. 2. Definition: International Arbitration is a means by which a dispute can be definitively resolved, pursuant to the parties’ voluntary agreement, by a disinterested, non-governmental decision-maker. a. USA Courts have defined the arbitration agreements as a special type of forum selection clause that posits not only the situs of the suit but also the procedure to be sued in resolving the dispute. 3. Defining Characteristics of Commercial Arbitration a. First, International arbitration is always pursuant to the parties voluntary agreement—it is always consensual. b. A second characteristic is that international arbitration should produce a definitive and binding award that is enforceable through national courts. c. Third characteristic is that the decision maker is a non-governmental entity or not a governmental official acting in their official capacity i. The arbitrators are private persons who are neutral third parties 4. Procedural rules that govern arbitration are international in nature—they do not come from the legal regime of a country—and the parties and the arbitral tribunal fashion the procedural rules that apply to the arbitration. a. Arbitral panels have autonomy to make their own procedural rules i. Some limits on that autonomy: 1. Some requirements regarding national laws where the award may need to be enforced—basically, the panel will pay attention to standards of national laws where the award will be enforced b. Some states may have technical requirements such as a person must be under oath and that translations must be of a certain quality—i.e. certified translations. 5. Arbitral institutions themselves do NOT arbitrate the merits of the dispute; rather that is the responsibility of the particular individuals selected by the parties or by the institution as arbitrators 6. Arbitration can be Institutional or Ad Hoc: a. Institutional Arbitration i. Triggered by notice of arbitration or request for arbitration 1. Equivalent to a complaint in the USA law ii. Then, other side files a reply (respondent’s answer; the first responsive pleading) iii. Next, selection of arbitrators – could be done by agreement of the parties; or the arbitration body has appointed an authority who steps in and selects the arbitrators; or each party nominates the arbitrators and those designate the chairman of the panel 1. Arbitral institution will select the arbitrators and what qualifications are needed and the method for resolving a challenge to arbitrators (procedural rules). Also 24 procedural rules say where arbitration takes place and how there will be a review of the award. iv. After that, there is something like a pre-trial conference to decide which issues will be addressed in arbitration and it is written in a Comprimi v. Then, the arbitrators decide on the schedule b. Ad Hoc arbitration i. It is NOT conducted under the supervision of an arbitral institution. Instead, private parties select an arbitrator or arbitrators who resolve the dispute without institutional support. ii. UNCITAL rules usually provide procedural rules iii. Some national laws says that national courts can appoint the arbitrators 7. Major difference between Institutional and Ad Hoc arbitration is that there is no supervising body for ad-hoc arbitration. 8. Federal Arbitration Act (―FAA‖)—9. U.S.C. 1 et. seq. a. 3 major sections that apply to three separate sets of cases i. The Domestic FAA--§§ 1-16—applies to agreements and awards affecting either interstate or foreign commerce ii. NY Convention’s implementing legislation--§§ 201-210—applies only to awards and agreements falling under the NY Convention iii. Inter-American Arbitration Convention’s implementing legislation--§§ 301-07— applies only to awards falling under the Inter-American Convention (it is worded similarly to NY convention) b. Section 2 of the FAA is the starting point (deals with arbitration agreements) i. It provides that arbitration agreements involving interstate or foreign commerce are valid, irrevocable and enforceable 1. Exception—arbitration agreements are valid unless there are grounds for revocation of any contract. a. What law is looked to for what grounds there are for revocation of the K? i. One option is federal law; USA courts have held that the FAA does create substantive federal law and that it preempts inconsistent state and foreign law ii. Most courts have said with respect to exception clause state contract law applies. 1. E.g. fraud in the inducement and fraud in the factum; lack of capacity; unconscionability; coercion; illegality; and waiver c. Section 7: it allows the USA district courts to issue compulsory process to assist arbitral panels in taking evidence. d. Sections 9-11: deal with arbitration award—says that arbitral awards are enforceable and then it lays out the process on how to get an award vacated, modified or corrected. 9. New York Convention on Arbitration (a.k.a. The United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards) a. Pursuant to Convention an arbitration agreement and arbitral awards have binding affect in the countries that have ratified the convention. b. Purpose is to recognize the enforcement of arbitration agreements; also second purpose is to unify the standards. c. Three acts required by the Convention: i. National court must recognize and enforce arbitral awards ii. Recognize the validity of arbitration agreements 25 iii. Refer the parties to arbitration where there is a valid arbitration agreement that is subject to the Convention d. Sources of Law in USA dealing with enforcing arbitral awards in USA i. NY Convention ii. FAA iii. State law—courts have held that the FAA does not ―occupy the entire field‖ 10. Enforceability of International Arbitration Agreement under the NY Convention and FAA a. Arbitration is always a matter of contract (consent)—a party can never be forced to submit a dispute to arbitration which he has not agreed. b. When parties challenge the enforceability it is done in one of three ways: i. Challenge the existence, validity, or enforceability of the agreement ii. Challenge the particular claims as not subject to arbitration (non-arbitral) iii. Disputes arise over the interpretation of the arbitration clause – e.g. scope, classes of disputes subject to arbitration. c. Doctrine of Separatibility i. Arbitration clause is separate and free standing provision of the K in which it is found. Accordingly, the arbitration agreement will survive even if the underlying K is found invalid. d. Kompetenz-Kompetenz Doctrine i. Holds that the arbitral tribunal has the jurisdiction to decide its own jurisdiction 1. It is not universal; some of the institutional rules have it and some do not, so parties consider it when picking arbitration institutions and the rules ii. The jurisdictional decision of the arbitrators can be appealed and, thus, is subject to judicial review 1. Note that the arbitral proceedings do not stop while waiting for review. e. Jurisdictional requirements in the NY convention (when NY convention applies) i. 5 jurisdictional requirements: 1. Convention is applicable in US courts only if the dispute arises out of commercial relationships 2. Convention is applicable in US courts only on the basis of Reciprocity 3. Convention only applies to agreements concerning foreign or non-domestic awards 4. Convention only covers agreements in writing 5. The parties’ agreement must provide for arbitration of differences which have arisen or which may arise in respect of a defined legal relationship, whether contractual or not. ii. RULE: When the above 5 requirements apply the parties have to be referred to arbitration 1. Exception a. Court finds that the agreement is null and void, or inoperative or incapable of being preformed i. This raises a choice of law question – which law applies? 1. State contract law principles b. Standards for finding a agreement null and void i. When there is an internationally neutral defense ii. Contravenes fundamental public policy of the forum f. Note that both FAA and NY Convention require USA courts to stay the proceeding if the proceeding involves issues that are referable to arbitration. g. Ledee v. Ceramiche Ragno 26 i. P argued that arbitration agreement was ―null and void‖ because it contravened public policy. ii. HELD: The parochial interests of a state CANNOT be the measure of how the ―null and void‖ clause is interpreted. Rather, the ―null and void‖ clause must be interpreted to encompass only those situations—such as fraud, mistake, duress, and waiver—that can be applied neutrally on an international scale. h. Rhone Mediterranee Compagnia Di Assicurazioni E Riassicurazioni v. Achille Lauro i. P argues that the arbitration clause is unenforceable ii. HELD: the fact that the arbitration provision may have contravened Italian law did not render the agreement null and void under the NY Convention iii. RULE: Under Convention on Recognition and Enforcement of Foreign Arbitral Awards, agreement to arbitrate is ―null and void‖ only when it is subject to internationally recognized defense such as duress, mistake, fraud or waiver, or when it contravenes fundamental policies of forum state; ―null and void‖ language must be read narrowly, for signatory nations have jointly declared general policy of enforceability of agreements to arbitrate. i. Republic of Nicaragua v. Standard Fruit Company i. Dealt with free standing nature of arbitration clause ii. Two issues: (1) whether memo was a K and (2) whether arbitration clause was valid and enforceable. iii. RULE: With respect to validity of the arbitration clause, evidence of the fact that the parties acted as if there was a K should go to whether there was an arbitration agreement. 1. Federal substantive law governs issue of arbitrability (whether there should be arbitration) iv. RULE: Court should determine arbitrability by reference only to the arbitration clause. Must look at the arbitration clause as a free standing agreement. Do not look to the K as a whole 1. Arbitration agreement/clause is separate unless there is evidence to the contrary. 11. Non-Arbitrability Doctrine in USA Courts 1. Mitsubishi Motors Corp. v. Soler Chrysler Plymouth a. Mitsubishi selling cars to Chrysler and Chrysler did not keep up the volume it said it would order. Mitsubishi brought anti-trust claim. b. ISSUE: Whether Antitrust claims are ―not capable of settlement by arbitration‖ c. HELD: Antitrust dispute is subject to arbitration under NY Convention i. S. Ct. rejected the claim that the complexity of anti-trust cases required no arbitration ii. S. Ct. said there was no reason to think that arbitration would not be good or that arbitrators are not competent enough to handle it d. Note that American Safety held that anti-trust cases should not go to arbitration because: i. Ks which generate anti-trust disputes can often be Ks of adhesion; thus one should hold in disfavor adhesion Ks with choice of forum clause 1. S. Ct. rejected this because there is an exception to the NY convention that says do not enforce an arbitration agreement that comes from adhesion K ii. Anti-trust cases are hard and take time 1. S. Ct. rejects this and says that arbitration is an adaptable and flexible process that can be mended to the case iii. Anti-trust issues are too important for arbitrators, especially foreigners who do not know US laws 27 1. S. Ct. rejects this and says this is not a problem because can choose arbitrators for their legal or business expertise iv. Anti-trust law has both a remedial purpose and a deterrence purpose (because they allow triple damages) 1. S. Ct. found that (1) private cause of action policing function is incidental function and the primary function is remedial—compensation for competitor’s injury and arbitration provides remedial function; (2) where arbitration clause also has choice of law clause calling for USA law then the arbitral tribunal should apply that law to the dispute so can carry out the deterrence function (3) important idea is the ―second look doctrine‖— Having permitted the arbitration to go forward, the national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed. a. Basically, the S. Ct. says that it will let the dispute go to arbitration and when the parties come back to enforce the arbitration judgment a court will then have opportunity to address whether enforcement was a deterrent. e. S. Ct. mentioned 2 defenses to the argument that a particular claim can be submitted to arbitration: i. Where arbitration clause itself explicitly excludes the claim that is being brought, that exclusion is respected ii. Explicit provision in statute—If statute explicitly calls for judicial recourse then that claim does not go to arbitration. f. Since courts generally enforce an arbitration agreement, as a practical matter, the arbitration clause needs to be explicit as to what claims are included and excluded. 2. Scherk v. Alberto-Culver Co. 1. FACTS: Alberto (Hair products Co. based in Illinois) wanted to do business with Scherk (German entity) and they entered into trademark licensing agreement. Alberto was unhappy with deal and wanted to rescind the K but Scherk was happy. Alberto brought suit in District Court for damages and other relief, contending that petitioner's fraudulent representations concerning the trademark rights violated the Securities Exchange Act a. K called for arbitration before ICC in Paris. Thus it is an institutional arbitration. Laws of Illinois would govern the K. b. In this arbitration clause: it talks about any controversy or claim ―arising out of this agreement‖ or the breach thereof. This is narrow because it does not say ―in connection with‖. Last sentence says laws of Illinois govern and apply to interpretation and the performance of the K. The place of arbitration was Paris. c. Alberto argued: Lack of personal jurisdiction and lack of subject matter jurisdiction and forum non conveniens and asked for stay of action while there was arbitration in Paris. 2. ISSUE: whether Securities Act applied or whether arbitration act applied to the dispute. a. Real issue: whether securities claims are arbitrable 3. S. Ct. found that the Federal Arbitration act was designed to stop hostility to arbitration agreements and places arbitration agreements on same footing as a K. 4. Next the Court talks about an earlier case—Wilko—and distinguishes it a. In Wilko a small customer was pitted against a large brokerage house. Whereas here there were 2 big entities. So the players were sophisticated. 28 b. Court recognized that the Federal Arbitration Act requires the agreements to be enforceable whereas the Securities Act was made to protect the little investor where there was misrepresentations c. In Wilko, Court found that parties could not agree to waive parts of the securities act and thus that part of the agreement was unenforceable d. First distinction is that the Scherk case dealt with securities act of 1934 which did not have special right to recovery. e. Second, cases are distinguishable because of the language in the agreements. The Scherk agreement was truly international i. To determine that the court looked at nationalities of companies, where companies do bus, where K signed, where deal was signed, where negotiations took place and where the place of business would be under the K 1. All those facts pointed to that the agreement was an international agreement 5. Court then went on to say why arbitration agreements are a good idea and should be held in favor in USA courts. Reasons to support arbitration a. Where there is an international agreements there will always be a conflict of laws dispute i. Where there are conflict of laws disputes, the arbitration agreement makes things orderly as choice of law is chosen b. Arbitration resolves the risk that a dispute would be referred to a hostile forum c. Idea that there would be a legal ―no man’s land‖ (parallel proceedings) or ―race to the courthouse‖. So favoring arbitration precludes this i. Also, with parallel proceedings there could be conflicting results d. Not enforcing Arbitration agreements is parochial in that you believe your home court can do it the best. e. Extraterritorial effect of USA law—court said trade cannot be had on our terms and under are laws f. Idea of freedom of K and idea of obligations of K g. Courts managerial pressures—courts are busy and thus arbitration takes pressure off courts 6. S. Ct. goes to the Real Question: When have provision of securities act which says cannot waive act provisions or requirements, how can we waive the USA courts jurisdiction over the claims a. The S. Ct. treats the arbitration agreement as a special choice of forum clause i. Court relied on Bremmen case (not covered in this course) which says choice of forum clause is presumed to be good and valid (will accept what parties decide for forum unless there is a strong showing to justify setting it aside) 1. The arbitration agreement was just a ―super-sized‖ forum selection clause and that is how the S. Ct. got past the Securities Act. 7. DISSENT a. Say it as a case of legal statutory rights as opposed to K rights b. Would have relied on public policy exception, which requires a balancing test that permits the courts to balance between parties ability to arbitrate and national public interest c. Dissent had concerns about arbitral awards i. Pretrial discovery is likely not available ii. Some claimants could not to afford foreign arbitration and could be left with no remedy at all iii. Choice of venue is forfeited 29 1. P in USA has 50 state’s laws to choose from but under arbitration you have made one choice iv. Arbitral award can be made without explanation of reasons v. Arbitrators might not have same legal competence as judges Recognition and Enforcement of International Arbitral Awards 1. The NY Convention imposes a general requirement that signatory states recognize arbitral awards made in other countries 2. The NY Convention presumes the validity of awards and places the Burden of Proof of proving invalidity on the party opposing enforcement 3. Arbitral Awards need NOT be confirmed in the arbitral situs before enforcement can be sought abroad. 4. Article III provides that signatory states may NOT impose either conditions or procedural requirements that are more onerous than those applicable to domestic awards. 5. The presumption of enforceability of arbitral awards is subject to 8 exceptions: a. Article V(1)(a) – Lack of Capacity/Invalidity of arbitration Agreement - The award was rendered pursuant to an arbitration agreement that was invalid because, under the applicable law, the parties lacked capacity to make the agreement OR the agreement was itself invalid. b. Article V(1)(b) – Due Process/Notice - the losing party was NOT given proper notice of the appointment of the arbitrator OR of the arbitration proceedings OR was otherwise unable to present his case c. Article V(1)(c) – Arbitration in Excess of/beyond the Scope of Jurisdiction - The arbitral award deals with a difference NOT contemplated by OR NOT falling within the terms of the submission to arbitrate. i. This exception is narrowly construed d. Article V(1)(d) – The composition of the arbitral panel OR the panel’s proceedings violated either the parties agreement or the law of the arbitral forum. e. Article V(1)(e) – The arbitral award is either NOT yet ―binding‖ OR has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. f. Article V(2)(a) – Non-Arbitrability - The subject matter of the parties dispute is NOT capable of settlement by arbitration under the law of the enforcing nation g. Article V(2)(b) – Public Policy - Recognition or enforcement of the arbitral award would be contrary to the public policy of the enforcing nation i. Enforcement of foreign arbitral awards may be denied on the basis of the public policy defense ONLY where enforcement would violate the forum state's most basic notions of morality and justice. ii. This defense is narrowly construed h. Article VI – Where the application has been made to a court or other competent authority of the country in which, or under the laws of which, that award was made, then the court where enforcement is sought may, if it considered it proper, adjourn the decision on the enforcement of the award. 6. NOTE: Federal Arbitration Act § 10 has been read to include an implied defense to enforcement where the award is in Manifest Disregard of the law. 7. Parsons v. RAKTA a. FACTS: Overseas had K with Egypt to build paper plant and work was halted because of Six Day War. Once Overseas notified RAKTA that it would stop because of force majure (act of god clause in the K) it could have continued to do the work in order to mitigate damages. Arbitration tribunal of 3 under rules of ICC is convened. Panel found that although overseas had valid force majure defense, it was only valid for about a month. After that period ended 30 b. c. d. e. Overseas had an obligation to continue the work. Panel found Overseas liable for large part of cost for the Panel’s work (like English rule where loser pays the costs and fees) RATKA brought a counterclaim and this related to letter of credit financing mechanism which was to satisfy penalties of panel decision and RATKA was trying to stop Overseas from drawing down the letter of credit. ISSUE #1 - Where is the courts jurisdiction: i. Implementing legislation of the NY Convention—gives federal district courts original jurisdiction to hear and enforce foreign arbitral awards ISSUE #2 - Whether court would enforce foreign award. i. Court said there is a powerful presumption in favor of enforcement of arbitral awards. RULE: The burden of proof is on the party trying to block the enforcement. That party also has the burden of establishing the express defenses in the NY Convention. i. Defenses (Exceptions) raised: 5 were discussed in this case plus an implied exception: 1. Public policy a. The issue was what is public policy? The court concluded that public policy under the convention does NOT mean USA foreign policy; rather public policy under the convention means that there is clear statutory or case law that would be violated. It does not include any generalized notions of justice. The court set a high standard of public policy using words like ―fundamental notions of morality‖ 2. Non-arbitrability a. Overseas argued that the award included arbitration of matters that could not have been resolved in arbitration proceedings. Court agreed with the idea that there are certain categories of claims that are nonarbitral because of certain national interests, for example anti-trust claims. BUT the court found that the matters in this case were within the class of claims that could be decided by the arbitration panel. 3. Due process a. Article V(1)(b) applies if person seeking to block award was not give proper notice or was not allowed to present their case. USA courts have held this to mean that there are basic due process requirements and if they are not met the court can refuse to enforce the award. In this case, what happened did not rise to the level of a due process violation. The tribunal had enough evidence from the witness who would have testified –but could not because of scheduling conflict -- to review even though he could not attend. Also, when you enter into arbitration agreements you give up courtroom rights, such as subpoena of witnesses. 4. Whether the award was outside the tribunal’s jurisdiction—scope of the tribunal’s jurisdiction a. Article V(1)(c); Overseas argued that the award was based on determination of issues outside of the agreement’s scope. Court disagreed. 5. Award was excessive a. This exception is construed narrowly. Court went through each part of the award. Court rejected Overseas’ argument because it gave great deference to the tribunal’s award since there is a strong presumption of validity of the arbitral award. Court said it will defer on issues of both fact and law. 31 b. Overseas complained of having to bear the costs of arbitration (the K was silent on it but parties agreed to ICC rules); Court found that both of the parties in pleading before panel had asked for an award for costs and the court treated that as a tacit agreement for award of costs. 6. Award is in manifest disregard of the law (this is an implied exception) a. Court found there was no manifest disregard for the law in this case. 8. Chromalloy v. Egypt a. Chromalloy won before arbitral panel and went to US court seeking to enforce the arbitral award. Egypt appealed the arbitral decision to the Egyptian Court of Appeals to seek nullification of the award. The Egyptian Court of Appeals nullified the arbitral award. Chromalloy petitioned the US District Court to recognize and enforce the arbitral ward. b. HELD: the decision of the Egyptian Court of Appeal nullifying the arbitral award, which was proper as a matter of United States law, was NOT entitled to res judicata effect in the US. c. ISSUE: Whether US court, which applied NY Convention, should enforce the award even though it was nullified at the place the award was rendered (place where arbitration took place) d. The court divided the ISSUE in two i. ISSUE 1: Whether the award was valid for recognition in a USA court 1. There is a powerful presumption of enforceability of an arbitral award. 2. Under the NY Convention the United States District Court must recognize and enforce the award unless one of the exceptions applied a. The exception at issue in this case was a discretionary exception under Article V(1)(e): i. Recognition and enforcement of the award MAY be refused if a country (Egypt) furnishes proof that the award has been set aside by a competent authority of the country in which, or under the law of which, that award was made. b. Also, the court looked at article 7 of NY Convention which is phrased in mandatory language: i. The Convention requires that the provisions of the Convention shall not deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law of the country where such award is sought to be relied upon. c. RULE: Under the United States law, Arbitration awards are presumed to be binding, and may only be vacated by a court under very limited circumstances: i. A court MAY make an order vacating the award upon the application of any party to the arbitration: 1. Where the award was produced by corruption, fraud, or undue means. 2. Where there was evident partiality or corruption in the arbitrators, or either of them. 3. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. 4. Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and 32 definite award upon the subject matter submitted was not made. d. RULE: An arbitral award will also be set aside if the award was made in ―manifest disregard of the law. i. Manifest disregard of the law may be found if the arbitrators understood and correctly stated the law but proceeded to ignore it. 3. Court found none of the exceptions applied and thus as a matter US law the award was proper. Therefore, there was no basis not to enforce the award. This shows the powerfulness of the presumption that an arbitral award is enforceable. ii. ISSUE 2: Whether the Egyptian court’s decision nullifying the award should be recognized as a valid foreign judgment in a US court. 1. Court’s reasons why NOT to recognize the Egyptian Court of Appeal’s decision: a. (1) The arbitration agreement precluded an appeal to the Egyptian court. b. (2) Egypt said that its courts decision should be given res judicata effect and its decision required comity i. Court rejects both arguments because (1) comity does not require anything, it is a matter of courtesy among nations; and res judicata did not apply c. (3) The court they referred to clear public policy in favor of final and binding arbitration and said that a decision to recognize the Egypt courts decision would violate that clear public policy 2. This case sends a clear message that the arbitration awards can be relied on and this is helpful to international commerce; also, the US court shows it wants to enforce arbitral awards because it does not want other foreign courts not to enforce awards given to USA Ps. IRAN-US CLAIMS TRAIBUNAL 1. Background: Tribunal arose out of the Iranian militants’ seizure of USA embassy and their taking of American hostages. USA took steps after the takeover of the USA embassy to seize all Iranian assets in USA. Iran and USA reached agreements called the Algiers accord (2 of them): a. General declaration—USA agreed to restore Iran economic status back to how it was in 1979; and the parties would terminate all litigation between the governments and their nationals and the claims would be settled in a tribunal; also set up bank account from which US nationals claims can be paid; b. Claims settlement declaration—created tribunal and gave it jurisdiction over claims arising between Iran and USA and their nationals. 2. As a result of Algiers accords the President issued an executive order suspending all claims in US courts that were within the jurisdiction of Tribunal. Also, the president issued an order that the Tribunal’s ruling on the merits would be final for all purposes. 3. What does a USA court do with an award from the Iran-US Tribunal? a. Gould I case (1989) i. Tribunal ruled that Gould had to pay money to Iran and had to give up the equipment. Gould filed motion to dismiss when Iran tried to enforce award. The Algiers agreement did not provide for claims being paid to Iran (but court got around this) ii. ISSUE: Whether Iran-US Tribunal’s award could be enforced in the USA courts? 1. RULE: Three basic requirements exist for jurisdiction over the IRAN-US Claims Tribunal’s award to be conferred upon a USA district court. The 33 award (1) must arise out of a legal relationship (2) which is commercial in nature and (3) which is not entirely domestic in scope. 2. 2 allegations by Gould: a. Gould claimed that arbitration agreement must be in writing and that Gould never agreed to arbitration i. Court said Algiers agreement was in writing and it was ok that it was not between Gould and Iran because the President has the authority to speak on behalf of USA nationals and thus he can settle claims on their behalf. ii. Gould ratified the agreement by filing its claims with the Tribunal and thus waived their argument concerning that it did not agree to arbitration. b. Whether the agreement was made pursuant to a national arbitration law i. Gould used language of NY Article 5(1)(e) to say that agreement had to be based on national arbitration law. Court rejected this. iii. HELD: USA courts have jurisdiction to enforce Iran-US Claims Tribunal awards. 4. Gould II a. RULE: Burden of proving that Iran-US Tribunal exceeded its jurisdiction rests on the party opposing the confirmation of the arbitration award. b. RULE: In reviewing foreign arbitral award under the NY Convention, court examines whether award exceeds scope of parties’ pleadings, technical pleading errors cannot be the basis for refusing to confirm the foreign arbitral award. c. ISSUE: Whether Tribunal dealt with a dispute not within the Tribunal’s scope i. Gould argued that it was outside Tribunal’s authority to give award based on an issue other than what was in the pleadings 1. Court rejected it as a mere technicality. The court said a technical pleading error cannot be basis for refusing to enforce an award. INTERNATIONAL COURT OF JUSTICE (ICJ) 1. Background a. ICJ was preceded by Permanent Court of Justice which stopped functioning because of WWII. USA was never party to PICJ b. UN Charter adopted and included establishment of ICJ i. Statute called for transfer of jurisdiction of the PICJ to ICJ c. Typically ICJ breaks a case in phases: (1) requests for preliminary measures (2) jurisdiction stage (3) merits phase (4) damages phase—most cases do not make it to this stage d. 15 judges and they are elected; judges cannot be recalled by their home state. i. Usually the five permanent members of the UNSC have had a judge on the ICJ and no two judges are from the same state. ICJ judges are selected in order to represent various legal systems of the world ii. An ICJ judge can oversee a case involving their home state; however, an ICJ Judge cannot sit on case in which he/she had prior involvement in. e. Where none of the judges on the ICJ have the nationality of a state engaged in a contentious dispute, the party can appoint one ad hoc judge of that states nationality. f. ICJ cases decided by simple majority 2. Statute of Court a. 5 parts b. Statute designed to build in limitations to ICJ jurisdiction. ICJ was not intended to have wide ranging authority over any claim. ICJ is a court of limited jurisdiction. c. Article 38—ICJ resolves matters over international law, not national law 34 d. The judgment of ICJ is final and without appeal and is only binding on parties to the dispute; parties NOT a party to dispute are not bound by decision. However, the ICJ does consider previous decisions persuasive authority i. NOTE WELL: Provisional measures in contentious case are binding on the parties e. The statute does not tell how to enforce decisions; rather UN charter article 94 says that members states have to abide by court judgment; if not then that sate is in violation of the UN charter and then the complaining state can refer the offending state to the UNSC which MAY take action—recall that DECISION by UNSC is the only decision of UN binding on members of UN. f. One lower USA court has held that ICJ decision cannot be enforced in USA courts and do not give rise to a cause of action to be argued in USA courts. 3. ICJ Jurisdiction a. ICJ Jurisdiction -- Two types: (1) Contentious and (2) Advisory b. ICJ Jurisdiction in Contentious Cases: Contentious cases are where a state sues another state; ONLY States are parties! 1. Excludes corporations, individuals, firms, international organizations, including the UN, EU, WHO, and subgroups/sub-states (i.e. Florida, Kurds, etc.) ii. Article 36 (1) – Jurisdiction is Consensual 1. Art 36(1) – states can only be brought to court with their consent. Art 36 regulates the multifarious forms that consent may take. 2. Compulsory jurisdiction can be had in 3 ways: (1) ad-hoc, (2) bilateral treaty, and (3) unilateral treaty a. Ad-hoc referral – Art 36(1) i. Referral through a specific agreement (been read expansively); need acceptance to jurisdiction every time there is a dispute. 1. Comprimi: ad-hoc agreement to trust dispute settlement to a third party; it only creates jurisdiction over that particular, specific dispute between the parties; jurisdiction would not apply to any other cases) b. Referral in bilateral treaties – 2 parties agree disputes will be decided by ICJ i. E.g. economic treaties ii. Usually the treaty will contain a clause allowing one party to sue another party under the treaty in the ICJ. This acceptance to jurisdiction is for all cases arising under the treaty (this is different from ad-hoc) c. Referral in multilateral treaties i. Some of the new treaties have a specific referral to the court. (Vienna convention, Genocide Convention) ii. Sometimes a referral in a treaty refers to a certain type of dispute. iii. Can always opt out of this jurisdiction through a reservation. iii. Article 36(2) The Optional Clause—delayed consent to jurisdiction 1. Article 36(2) – a unilateral declaration of a state that they accept the jurisdiction of the court. (The U.S. at the moment does not have an optional clause as a result of the Nicaragua negotiation) 2. Art 36(3) – The declarations referred to above may be made unconditionally or on condition of reciprocity on the part of several or certain states, or for a certain time. 35 a. Principle of Reciprocity: Every condition that a country attached to its reservations can be raised by any party; thus any party can invoke the other parties’ reservations where there is a dispute between the two parties. Only the party to the dispute can invoke it against the other party in the suit. The parties have to be parties to the treaty in order to invoke there reservation of one against the other. 3. If State A makes a reservation in its optional clause, then all the states are entitled to use the reservation against the reserving state iv. NOTE: Today, USA has withdrawn from compulsory jurisdiction. 1. The USA may still be subject to jurisdiction of ICJ through (1) ad hoc consent, or (2) via jurisdiction article in a treaty. c. Advisory jurisdiction i. States and individuals do not have standing to request advisory opinions. Rather only organs of the UN can request advisory opinions, and organizations/specialized agencies of the UN can get advisory opinion on a topic relevant to their specialization ii. Advisory opinions are NOT binding 1. However, Operating documents of UN specialized agencies (e.g. UNESCO) will have clause in their charter that says they will be bound by advisory opinions 4. Admissibility (prudential) doctrines a. Admissibility – ICJ does not reach the merits. i. Admissibility is NOT the same as jurisdiction b. These doctrines (admissibility doctrines) limit cases that can be heard by ICJ. i. Admissibility Doctrines: 1. Standing 2. Mootness – the case lacked legal object 3. Commitment to other settlement procedures a. Not a set rule that the Court will not look at the case if there are other settlement procedures. b. In the Nicaragua case, the dispute had been taken up by another settlement process, but the court said this was irrelevant. 4. Local remedy rule – an individual (which does not have standing before the ICJ) has to exhaust all local remedies in their home state before having their state bring a claim on their behalf to the ICJ 5. The Nicaragua Litigation—Nicaragua v. USA a. Background: Nicaragua was governed by dictators who were overthrown by a rebellion encouraged by the U.S. administration (Carter). Unfortunately, it became clear the new government was aligned with the Soviet Union. Regan came into office and started to support the Nicaraguan contras who were trying to overthrow the government. Nicaragua brought suit against the U.S. for violating international obligations by the use of force against Nicaragua and intervening in Nicaragua affairs through the support of the rebels. b. Jurisdiction i. Nicaragua said there were 2 basis for jurisdiction: The FCN and the Optional Clause ii. FCN Treaty  Friendship Commerce and Navigation Treaty  No Jurisdiction 1. FCN treaty had a referral clause to the ICJ. However, the U.S. said the treaty did not provide jurisdiction because this was not a friendship situation; therefore the scope of the treaty did not cover this situation. 2. The court agreed w/ the U.S.  The FCN was not a basis of ICJ jurisdiction in this case. 36 iii. The Optional Clause  found jurisdiction 1. ICJ provision at issue  Art 36(5) – Declarations made under Art 36 of the PCIJ statute which are ―still in force‖ shall be deemed, as between the parties to the present Statute, to be the acceptances of the compulsory jurisdiction of the ICJ for the period which they still have to run in accordance w/ their terms. 2. Nicaragua relied on 1929 declaration by Nicaragua and 1946 declaration by the U.S. to say the ICJ had jurisdiction under the Optional Clause. 3. There was a problem \ with the Nicaragua 1929 declaration because although Nicaragua signed the PCIJ statute, it never completed the ratification process. Nicaragua’s ratification had been ―lost at sea‖ and the process was never completed during the time of the PCIJ. 4. Nicaragua and the US argue over the interpretation of ―still in force.‖ a. Nicaragua argued that ―still in force‖ referred to a time period and Nicaragua still had the ability to cure the defect in the declaration. b. US said ―still in force‖ required that there be a binding declaration. c. Ct accepted Nicaragua’s interpretation. 5. Ct determined Nicaragua cured the defect in the declaration by becoming a party to the current ICJ statute. Furthermore, there was subsequent behavior by Nicaragua indicating its acceptance (more controversial). And Nicaragua had been referred to in the Yearbooks as a party to the treaty. c. Admissibility – a number of reasons the US gave why the ICJ should not address the merits. i. Presence of third parties 1. US argued the court should not decide the issue because the presence of El Salvador was needed. This is because Nicaragua was giving money El Salvador and thus adjudicating the case would affect El Salvador’s rights. 2. ICJ: There is a clear dispute between the US and Nicaragua and no 3rd party is needed ii. Matter (use of force) entrusted to UNSC 1. Ct rejected this argument. It looked at Art 24 and said just because the UNSC is entrusted with the use of force did not mean the court could not look at the issue. iii. Political question 1. USA alleges that the dispute is not a legal dispute and thus a political question 2. ICJ disagrees iv. Failure by Nicaragua to exhaust available regional remedies (Contadora process) 1. No rule that says other remedies have to be exhausted. d. HELD: the ICJ had jurisdiction 6. Oil platforms case—Iran v. USA (reaffirms Nicaragua case) 1. American military vessel was hit by a missile and it was disabled but not sunk. As a result, the U.S. destroyed a number of Iranian ships and oil platforms. 2. Iran says ICJ has jurisdiction: a. Iran argued that ICJ had jurisdiction under a treaty and the court disagreed b. Iran argued court had jurisdiction under Article 4. ICJ did not find jurisdiction under that article c. Iran argued ICJ had jurisdiction under article 10—freedom of commerce (article dealing with commerce). The ICJ found jurisdiction because USA interfered with Iranian stream of commerce. i. USA argued that the clause was limited to maritime commerce; ICJ disagreed. ii. USA argued that it was limited to commerce between Iran and USA and not commerce of private company; court implicitly rejects this. 37 iii. USA argued the word commerce should be interpreted restrictively and the ICJ disagreed. 3. The second major argument of the US was that FCN treaty does not apply to armed conflict and use of force. a. ICJ rejects this because the treaty provision giving ICJ jurisdiction did not have explicit limitation excluding use of force. It may have given a defense on the merits but does not limit the jurisdiction of the ICJ 4. When ICJ tried to interpret article 1 of the treaty the court looked at (1) ordinary meaning (2) object and purpose of the treaty, (3) working papers and (4) past practices of the states involved in the suit under the treaty they were party to. 7. Serbia and Montenegro case – Case Concerning Legality of Use of Force – Preliminary Objections 1. Serbia brought case against Belgium for use of force and Belgium argued the ICJ did not have jurisdiction because Serbia was NOT a successive member to the ICJ from the former Socialist Federal Republic of Yugoslavia. 2. ISSUE: whether prior treaties in force can bring a state into the ICJ. a. Serbia was trying to use article 35(2). It also used article 37. However, it could not meet the requirements of article 37—which says jurisdiction of disputes that would have gone to PICJ would go to ICJ but only for states that were parties to the PICJ. b. ICJ says that article 35 was meant to bring in treaties in effect at the time; it was not retroactive. i. Prof. Dailey says that since the states were not parties to present statute when case was brought, there was no jurisdiction. ii. The ―treaties in force‖ clause refers to those treaties that were in force at the time the Permanent Court (PICJ) was established. 38