IBTs Occur because of:

Local Scarcity or Unavailability of Product

To take advantage of Arbitrage: simultaneous buying and selling: the simultaneous buying and selling of the same negotiable financial instruments or commodities in different markets in order to make an immediate profit without risk

a hedged investment meant to capture slight differences in price; when there is a difference in the price of something on two different markets, to buy at lower price and sells at higher priceMany companies take advantage of the price auction internally, through production and manufacture of a good in different countries Profit for the companies involved

Legal Framework for International BusinessInvolve many different fields of lawOften trigger both international and national legal systems

Private International Law (PIL)

use of domestic choice of law rules by domestic courts to resolve issues of conflicts of law in an international contextThe choice of law can be international, but domestic is usually the starting point. Domestic rules that govern how judges select which law to use

US PIL Choice of Law Analysis

A court will engage in a private international law analysis when it hasn’t been discussed the parties and have to decide which jurisdiction to apply.Beginning Premises:State law governs in contracts re: Constitution 10th amendmentCourts won’t apply state law when it doesn’t apply, if federal law preemptsChoice of law multifactor Analysis, Restatement, Conflicts of Law (2), §§ 188, 403 (1971)§ 188 Restatement, Conflict of LawIf the restatement says there are more than one criteria, judges will have to engage in a balancing and weighing of the factorsFactors courts weigh when there is a choice between state law and foreign lawNeeds of interstate and intl systemsRelevant policies of the forumThe public policy interests of the other country and the relative interest of those states in the determination of the particular issueProtection of justified expectationsBasic policies underlying the particular field of lawCertainty, predictability, and uniformity of resultEase in the determination and application of the law to be applied.Different set of factors when it is Federal law vs. foreign law, foreign relations law, (sec) 403Need to find these

PIL Choice of Law Analysis Abroad

Civil Law Countries are very similar to the Restatement

Some countries who are signatories use Hague Conference on Private International Law in 1893:establish uniformity in rules across countriesUS is not a party to the conventions

The lex mercatoria (law merchant)

was a body of law used by merchants to resolve disputes across bordersNew Lex Mercatoria embodies a modern set of international rulesResult of new Lex Mercatoria is that private international law is reducing in importance for three specific reasons:Promulgation of international treaties and uniform codesCourts allow parties to choose governing lawAvailability of arbitration is overtaking litigation, arbitrating bodies don’t necessarily adhere to particular bodies of law

Public International Law

System of laws governing the relations of countries, NGOs, to a limited extent, the private conduct of individuals

Primary source are treaties Customary international law – standard practices or rules that take on a sense of legal

obligation through use and tradition. Mostly applies to traditional diplomatic / political stuff, like granting of asylum

Regional Supranational Law, like public international law

members are required to follow – like in a multilat treaty, EU law

Regional agreements, ie EU, ASEAN agreements, MERCOSUL, OAS

Harmonization of Law

Need for harmonization in the form of uniform laws and codes

The purpose of Uniform codes and other harmonizing measures is to give concepts a uniform meaning

Sources:

Hague Conference Conventions bilat treaties EU legislation

Urging instruments: model laws codification of custom and usage promulgated by an intl NGO international trade terms model contracts restatements

Major International Institutions Important to IBTs:

UNCITRAL (UN Commission on Intl Trade Law) is a govtal institution in that states are parties – are nonbinding until the nation ratifies in

own domestic law reports to UN how to unify commercial law Created the Contracts for the Intl Sale of Goods (CISG)

UNIDROIT international institute for the unification of Private law studies the needs and methods for modernizing and harmonizing private law and

commercial law

Intl Chamber of Commerce (ICC) promulgates rules for private parties to adopt by contract non-governmental – may be binding until private parties/countries adopt created incoterms uniform customs and practice for documentary credits (UCP) INCOTERMS (international commercial terms)

Major Sources of International Business Law

Sources: public international law

o in form of INCOTERMS, UCP regional agreements international commercial custom and usage domestic law

When Domestic Law is used as a source (rule): when there is an absence of a superceding international treaty silence of the parties (not stipulated in the contract or agreement) By Party Agreement (when it is stipulated in the contract or agreement) When mandatory law preempts party choice

o laws dealing with public rights that may apply in an international context – such as anti-trust, securities

(CISG) When the parties choose to opt-out CISG or when the contract places the issue out of its scope

o Art 6, provision 4(a) allows opt-out provision

For Domestic Disputes: Determining whether state law or federal law governs domestic contract disputes in the US When the parties are engaged in international sale of goods

Sources of Law in IBTs

Different aspects of the same transaction may be subject to different sources of law

Sources of law that may be implicated in an international Sale of Goods (Problem 1-6) Private International Law

o When no superseding international law applies, ando The parties did not elect a substantive contract law to govern the relationship

Public International Law dealing with private law issueso Comes into play when if there is a superseding treaty; ando if the parties have not expressly opted out; ando if the parties nations’ are signatories

Domestic Law dealing with private law issueso If the contract is silent; and no superseding treatyo The question remains which law will apply

federal, state or Which country’s law will apply

o Domestic law is used when other laws don’t speak to that particular issue (gap filler)o Probably will be on the final

Domestic law that deals with public law issueso Domestic law applies because mandatory public law controls a particular issue (e.g.

import/export compliance)

Relationship of International Law to Domestic Law

By the constitution and USC rulings, international law is our domestic law. US Constitution, art VI, cl 2

o Federal law is supreme law of the land The Paquete Habana decision, 175 U.S. 677, 700 (1900)

o international law is a part of our law, both federal and stateo customary international law is equal to law of treaties and other intl agreements and

part of law of the US Ware v. Hylton 1796 – when conflict between intl law and state law, intl law prevails Whitney v. Robertson, 1888 – when conflict between intl law and federal law, the law

enacted later prevails executive agreements and congressional executive agreements have same effect as

treatieso supremacy clause applies to congressional-executive Agreement and executive

agreementso Cheung v US 2000 – explicit statement by executive that treaty will not require

implementing legislation o When it is solely based upon the President’s foreign relations power, it is

controversial whether it is binding law. CISG is a self-executing treaty that has direct effect in state courts because it is federal law.

Self-executing vs. non-self-executing distinction

Those treaties that are self-executing are laws of the lando If the treaty is s-e, then the courts are obligated to apply as it is federal law.

Those that are not require implementing legislation from Congress Rule: Where a treaty or an international agreement is non-self-executing, the prior

inconsistent statute will not be superseded until the treaty or international agreement is implemented.

Rule: The prior inconsistent statute will be superseded on the date the implementing legislation goes into effect or some prescribed implementing act occurs

Foster v. Neilson, 1829o Distinction made between self-executing and non self executing treatieso Self-executing treaty – has a direct effect within the US as soon as the treaty is

entered into force w/o need for implementing domestic legislation. Factors to determine when a treaty is self-executing

o intent of the states that are party to the treaty to det if they are self-executingo Court examines provisions of the treaty and whether it was intended that courts

were to implement and not congresso If the treaty expressly states that it will require implementing legislation from

Congress (in some cases, courts will decide this as well)o Non requires implementing legislation from Congress

WTO agreements are non-self executing Courts are not obligated to apply non-self executing treaties

Example of non-self-executing:

Agreement on Subsidies and Countervailing Measures, art. 14, Calculation of the Amount of a Subsidy in Terms of the Benefit to the Recipient

[A]ny method used by the investigating authority to calculate the benefit to the recipient [in a subsidy investigation] shall be provided for in the national legislation or implementing regulations of the Member concerned and its application to each particular case shall be transparent and adequately explained.

Example of self-executing

CISG Article 99

When a State ratifies, accepts, approves or accedes to this Convention after the deposit of the tenth instrument of ratification, acceptance, approval or accession, this Convention, with the exception of the Part excluded, enters into force in respect of that State, subject to the provisions of paragraph (6) of this article, on the first day of the month following the expiration of twelve months after the date of the deposit of its instrument of ratification, acceptance, approval or accession.

What Law Applies

Problem:

Q 1.7 from the book. You are a counselor to a company that wishes to sell stuff to Argentina. Should you apply OH law or Argentinian law.

Ohio and federal law have implied warranties of fitness, Argentina does not Ohio Law

o It is both state and federal law. Federal law has adopted CISG, therefore any implied warranties from CISG will apply

o CISG has allowed opt-out, however, this must be express in the contracto UCC is other federal law. Even if parties have opted out of CISG, UCC kicks ino Parties can opt out of UCC, but this will create a gap, court will fill it with something

unless you have made an express choice of law.

Governing Provisions

even when you have made an express choice of law, it may not be enough to show that you have opted out on other laws, such as CISG

The courts will look at whether the parties evinced a clear intent to exclude the CISG in favor of other law

Drafting will determine what law applies

Primer on International Trade Law

a branch of public international law public law institutions and rules that facilitate and regulate international business

o WTO / formerly GATTo NAFTAo EUo ASEAN

Fair Trade Agreements (FTA):o Parties apply their own unfair trade practice laws against each other

Ex: Nafta, Ch 19, deals with dispute settlement procedures on antidumpting and countervailing duty measures

US Court of International Trade (CIT)o Has exclusive jurisdiction over trade remedy actionso US Court of Appeals for the federal circuit (CAFC) exercises appellate jurisdiction

over CITo Trade investigations structured like intentional torts

Authority over intl trade and investment is divided among the agencies:o USTR represents the USGo Customs (DHS) implements administrative orders from the DOC and ITC proceedingso DOC regulates exports and promotes exports

ITA (International Trade Administration)o International Trade Commission (ITC) – independent agency

International Sale of Goods

Risk-Based Approach to Int’l Sales of Goods (ISGs)

ISG involve risks, potentially greater than domestic sale of goodso unknown companieso distanceo transparency of informationo dissimilarity of countries

ISGs have become documentary saleso transactions where the delivery of documents transfers legal title to goods being

transportedo don’t need exchange of goods to effect transaction

third parties are brought in to minimize and distribute the riskso bankso insurance companieso carriers

Documents needed for an ISGo letter of credit (established by buyer and done by bank)o bill of lading (received from carrier to seller when shipment is loaded and carrier

paid)o commercial invoiceo insurance proof (received from carrier to seller when shipment is loaded)

Document Trail:

Letter of inquiry pro forma invoice purchase order written confirmation of PO (which entails the acceptance)

Buyer confirms the buy by establishing a letter of credit. Seller, in order to get letter of credit needs:

o bill of lading

Some Agreements involved:

1. sales contract between buyer and seller2. carrier and seller, carrier agreement3. letter of credit bank and buyer4. issuing bank and confirming bank agreement5. insurance agreement, with seller

Three Major Contracts in ISGs

1. Contract for the sale of Goods (k)

can be many contracts, including the sale of goods, arbitration agreements, confidentiality, etc.

documents buyer and seller exchange before the transaction occurs:o a letter of inquiry sent by buyero seller sends back quote, pro forma invoiceo buyer sends a PO based on the pro forma invoice if it decides to take the offer.

Buyer will go to bank before to ensure there is money to pay for the invoice Reasons why that acceptance is given by the seller, not the buyer:

o seller doesn’t want to be bound by the pro forma invoice, controls when the game starts

o written acknowledgement is acceptance

o a bargained for exchange does not require considerationo three elements of a contract: offer, acceptance, consideration

2. Letter of Credit (LoC)

LoC is a promise by the issuing bank to the confirming bank (or seller) to pay the seller when the proper documents have been presented. The exchange of documents effects the sale, not the delivery and acceptance of the goods themselves.

Parties to the LoC o the bank, both confirming (seller’s) and issuing (buyer’s)o buyer

confirmed letter of credit – where the issuing bank’s LoC is confirmed by the seller’s bank Law that governs in US: UCC Law that governs RoW: UCP (Uniform Customs and Practices for Documentary Sales, from

ICC) Most big banks are UCP members Have kept payment on LoC independent from the sales contract to minimize risk to the

banko Banks would be risk averse and not willing to issue LoCs, would get more involvedo would make sale of goods much harder and complicated w/o LoC

3. Bill of Lading (BoL)

contract of carriage: K between the seller and carrier to deliver goods to port of destination. Carrier will issue documents upon payment Also determines who is to receive the shipment

o Nonnegotiable Bill of Lading straight or white bill BoL is filled out to a specific person consignee (buyer) does not need to submit the original of the BoL to the

carrier to obtain possession of the goods. carrier is to deliver the goods to the person named as the consignee in the

bill or to an agency or person designated by the consigneeo Negotiable Bill of Lading

AKA yellow bill BoL is filled out “To Order of Shipper” carrier is to deliver the goods only to the person in possession of the original

negotiable bill properly endorsed. Carrier can surrender shipment to anyone with the endorsed bill carrier issues bill to seller after FOB Seller endorses it and other

documents and gives to issuing bank bank gives seller payment after requirements for LoC satisfied bank endorses bill of lading then forwards documents to buyer for its reimbursement buyer gives to carrier to get goods.

Parties:o sellero carriero sometimes is the freight forwarded if seller doesn’t give it to carrier directly

indicates goods have been loaded on board allows seller to obtain payment while the ship is still in its port of origin gives Buyer strong assurance that Seller has performed Carriage of Goods by Sea Act (COGSA)

o limits liability of carrier to $500 per package unless shipper declares otherwise in BoL

o does not afford any protection to a carrier acting in bad faith though if carrier takes shipment and claims lost, is bad faith if shipper (seller) can show carrier’s bad faith, C is no longer subject to he

COGSA’s liability limitation Other carriages may be subject to an international convention such as the International

Convention for Unification of Certain Rules Relating to Bills of Lading Clean on Board – no damage in the loading process

Remaining Risks

If the Goods are NonConforming, what remedy?o to be made wholeo show injury (breach of K)o fraud on carrier’s part, breach for LoC

Risk-Reducing Instruments for Buyer?o certificate of inspection by an independent company hired to inspect cargo

How are banks protected by negotiable bill, but not by a nonnegotiable bill?o negotiable bill, payment is only made after it has received the documents from

carrier and is endorsed by bank.o you want a negotiable bill so that it can be negotiable between many different

parties – ie if you are the buyer, you can sell it enroute and have it move along to where the next buyer is located. doesn’t have to go directly to buyer 1.

Commercial Terms under the ICC IncoTerms

Scope of application: delivery of tangible goods Displaces domestic terms in countries that accepted them In most cases, delivery is effected when goods are in custody of carrier Only relates to maritime shipments Delivery terms specify which party must perform the tasks necessary for formal delivery of

goods under K Allocates risk due to loss (RoL) between Buyer and Seller General Rule: RoL passes from Seller to Buyer when Seller has satisfied delivery obligations Traditional Rule: Delivery obligations are satified when the goods pass the “ship’s rail” CFR: Seller pays for transportation to port of shipment, loading and freight. Buyer pays for

insurance and transportation of goods from port of destination to buyer’s location. RoL passes to buyer at ship’s rail.

4 Groups of when is delivery obligation satisfied. E – departure (once leaves plant, is buyer assumes risk)

o E is for Ex – out of, referring to origin. and determine everything from seller’s origin. F – main carriage unpaid by seller

o f is for freeo named port of shipment (within seller’s country)o buyer must assume cost of carriageo buyer assumes risk upon passage of the ships rail at named port of shipment.

C – main carriage paid by sellero CIF: cost, insurance and freighto Delivery to named port of destination (in the buyer’s country)o seller has to pay for costs and freight to named port of destinationo buyer assumes risk at ship’s rail at port of shipment. o CIF terms, require usually a negotiable bill of lading. If do not, is breach

D – upon arrivalo destination. seller’s obligations extends up to destination.

Obligations are set using S as the point of reference Rule: in international transactions of goods contracts, consideration is not a requirement. IBT are governed by CISG if the party opted out of CISG for that particular issue, but require gap filler:

o go to private international law analysis

if states have adopted UCC, might use UCC if states have adopted modified UCC.

Biddle Brothers v. E Clemens Horst Company, 1 King’s Bench 934 (1911)Facts: Defendants are the sellers of hops in San Francisco. Plaintiffs are the buyers of the hops. Two sales contracts were formed with Vaux, one for delivery of each year’s harvest of pacific coast hops from 1905-12. The second contract the same except the good shipped was British Columbian hops.Issue: the sellers wanted payment upon delivery of goods. The buyers wanted to pay after delivery and when they had a chance to inspect.Holding: A CIF sale of goods is effected by actual delivery. Defendant failed in his duty. Find for plaintiff. Farwell and Vaughn Williams argue that absent an express provision demanding payment against documents, payment is made upon actual delivery (default).

Kennedy represents the current principle, that deliver is effected upon delivery of documents

Parker v. Schuller (1901) - a CIF contract failure to deliver the documents was failure in delivery.

E Clemens Horst Company v. Biddle Brothers, House of Lords (1912)Facts: appeal by defendants, the sellers, same caseRule: delivery of the bill of landing when goods are at sea is treated as delivery of the goods themselves, this rule being so old, need no authority to cite it.Holding: this time, find for the defendants. This judge agreed with Kennedy and this is the current belief.

§ 320(4) UCC (2003) provide the same as the ruling in Horst v. Biddle, unless otherwise agreed upon, payment upon tender of documents and buyer cannot demand actual delivery in substitution of the documents.

Delivery and Documentation: if buyer had accepted the document, even if it not in conformity then he waived his right

and has accepted the documents, the RoL has passes. you want a negotiable bill so that it can be negotiable between many different parties – ie if

you are the buyer, you can sell it enroute and have it move along to where the next buyer is located. doesn’t have to go directly to buyer 1.

II.C. Contract of Affreightment, Bills of Lading & Insurance

Contract of Affreightment duty of shipment usually falls to seller who charges to buyer most exports are CIF in form (port of destination) seller arranges transport through an intermediary, broker, or freight forwarder four modes of transport: air, rail, road, and water multimodal incorporates some or all modes of transport common carriage: shipment like FedEx private carriage – to lease the whole ship or in part by special arrangement. charter party common law distinction of common carriage and private carriage

common carrier: liability for damage or loss in the course of conveyance, except for:o liable as an insurer normally would – strict liability – no need to show faulto and could not limit liabilityo force majeuro acts of public enemy, ando inherent vices or faults of the shippero NJ Steam Navigation Co. v. Merchant’s Bank of Boston (US 1848)Private carrier: o Liability for loss or damage to the extent it was caused by a breach of an obligation

in the contract of carriage. Commercial Molasses Corp v. NY Tank Barge Corp

(US 1941)o can choose its customerso not strictly liableo this is a contract regimeo can refuse to offer serviceo look to the contract to determine liability amounto liable where breach of K is proximate cause of loss or damage and/or due to failure

to adopt ordinary standard of care. Ship hired for a specific voyage to carry a particular cargo for charter is not

considered a common carrier but a bailee for hire required to exercise only ordinary skill and care. The Wildenfels (2nd Cir 1908).

why the sliding scale of liabilityo if a party chooses the private carrier, they are more sophisticated party and would

have more knowledge in negotiation or understanding what he is getting into o a common carrier – will take anyone. Meaning, that most of the parties are in a

weaker position – judges will create leniency in the system.

COGSA Carriage of Goods by Sea Act of the United States

Applies to every BoL or document of title that evidences a K for the carriage of goods by sea to or from a U.S. port

it applies to common carriers, shipowners, private carriers whenever BoL is used and “carrier” is executing K of carriage to or from the US.

It is a federal statute and does not apply to transport outside the US. liability limit is $500 per package – so it is incumbent upon the seller to insure. Prevents application of tort remedies against carrier – not to other parties When use a clause paramount, if stipulates COGSA is the governing law, then the inland

portion of transportation is covered by COGSA and not other law. COGSA doesn’t normally apply unless there is such a stipulation.

FD Import & Export Corp. v. M/V Reefer Sun, SDNY, 2002

Facts: P arranged with D for transport. D arranged with carrier South Pacific a charter party –

Banana Suppliers:FruteraPacific Fruit(Ecuador)

P:Buyer: FD Import (NY cit)D: Carrier: Artic Reefers/SunCharterer: South PacificCustomer: Avrora(Ukraine)200,354 boxes of nanas$$ 1.9 mil

private carriage. Clause 27 – arbitration agreement in London with governing law as English law. FD was not a party to the charter party or the BoL. The shipment was found to be spoiled. P sought damages. D raised argument that the arbitration clause was binding on all parties and requested to stay the proceedings pending arbitration.Issue: whether the arbitration clause is binding on the Plaintiff if notice of arbitration not given.Holding: Yes it is.Rule: Pursuant to FAA, a district court must stay a proceeding if the parties have agreed in writing to arbitrate an issue.

Must consider 4 factors:1. whether the parties agreed to arbitrate2. the scope of the agreement: if the dispute arises from the agreement3. if federal statutory claims are asserted, whether congress intended those claims to be non-

arbitrable, and4. if only some of the claims are arbitrable, whether to stay the balance of the proceedings

pending arbitration.Reasoning:The court found that P had agreed to arbitrate because the terms of the charter party were incorporated into the Bill of Lading. Factor 1: P found to have agreed to arbitrate:A party does not need actual notice to be bound by an arbitration agreement. Constructive notice, so long as proper, is sufficient to create a binding arbitration agreement.Rule: Valid constructive notice is if you should have known something, you’ll be held responsible for what you should have known. Steel Warehouse.Constructive notice is deemed properly given if the terms of the charter party (or other prior agreement) were explicitly incorporated into the bill of lading. They must be expressly incorporated and explicitly referenced in the BoL. Son Shipping v. De Fosse Rule: terms of a charter party or BoL is binding on non-signatories if they have received constructive notice. Stolt Tank Containers, Inc. v. Evergreen Marine Corp. (2nd 1992).Rule: If an arbitration clause is broad, it may govern disputes of non-signatories and parties not listed in the contract. Broad meaning to cover all disputes arising under the charter. A narrow arbitration clause only applies to certain parties.Factor 2:Reasoning: Claim against charterer/carrier is within the scope of the agreement because it is an issue arising under the Charter Party, the improper transportation of the fruit. The cross claim is also within the scope of the agreement because that claim also arises from the Charter Party agreement. Therefore, both claims are subject to the arbitration clause. The claim against the suppliers are not within the scope of the agreement and not bound by the arbitration term. thiis claim does not touch matters covered within the Charter Party or BoL and concern the condition of the fruit before shipment.Factor 4:Rule: If the claims fall within the scope of an arbitration agreement, a court must stay proceedings with no discretion to deny the stay. 9 U.S.C. § 3.Rule: when there is a combination of arbitrable and non-arbitrable issues, a court has discretion to stay the non-arbitrable issues pending arbitration. If the non-arbitrable decision will have no effect on the outcome of the arbitration, or visa versa, then the claim will proceed.Holding: The non-arbitrable proceedings will continue in this court.Reasoning: the claim is completely separate from the claim against the carriers.

Bill of Lading

three functions:1. contract or evidence of the contract of carriage2. serves as a receipt for the goods3. serve as a document of titlte.

Pomerane Act (Fed BoL Act)

Fruit of the Loom v. Arawak Caribbean Line Ltd. SDFL 1998

Facts: Fruit contracted with Arawak to deliver goods from Jamaica to Kentucky. Awarak subcontracted the overland transport to Seaside from FL to KY. The shipment was hijacked and the goods were stolen. Amended Complaint has three causes of action: 1) negligence, 2) breach of bailment and 3) breach of contract. D was granted the motion to dismiss for negligence (violative of the economic loss rule), but denied motion on count of bailment. The BoL contained provisions that the parties agreed (1) be bound by the terms and conditions of the agreement, (2) the governing law is COGSA, (3) that the carrier could subcontract, and (4) that the terms of the agreement (Himalaya clause) would apply to all parties hired by Arawak, and (5) that the carrier would not be liable for loss or damage due to acts of thieves.Parties: P: Fruit, D: ArawakIssues: Whether the terms of the BoL were binding on all parties.Rule: when a BoL is issued to destination, it is a through bill and all connecting carriage is subject to its terms. Mexican Light & Power Co v. TX Mexican Railway. This means that carriage is subject to all the BoL termsHolding: Yes, the terms were binding.Issue: Whether the terms were valid.Rule: COGSA and 26 USC App § 1307 – nothing prevents a carrier from entering into an agreement as to the responsibility and liability of the carrier.Holding: the terms were validReasoning: The parties were free to enter into an agreement that outlines the responsibilities and liability of each party.Issue: did the terms extend to Seaside?Rule: Parties to a bill of lading may extend a contractual benefit to a third party by clearly expressing their intent to do so. Robert C. Herr and Co v. Krawill Machinery Corp.Rule: Himalaya’s Clause use of agent and independent contract is sufficient to apply the benefits of a BoL to a terminal operator, particularly when it is obvious that they cannot deliver to destination without use of an agent or contract. Certain Underwriters v. Barber Blue Sea LineBoL terms extends the rights of Arawak to SeaSide, third party subcontractor it hired, because of the intermodal caluse and himalaya clause. The exceptions claus also stated what Arawak would ntot be liable for. You get what you bargain for.The Paramount clause makes COGSA apply when does does not apply ex proprio vigoreExceptions clause exonerated carrier from liability for acts of “assailing thieves”.

Steel Coils Inc v. M/V Lake Marion (Ct of Appeals 5th Cir 2003)Parties: P: Steel Coils – importer of steel products.

Itochu – purchaser of the steelD: M/V Lake Marion

Lake Marion, Inc.Western Bulk (charterer)Bay Ocean – manager of Lake Marion who hired master and crew

Facts: Itochu bought steel from Russia. Entered charter party with Western Bulk to import the steel. WB chartered boat and Bay Ocean hired the crew. The steel was damanged enroute and had to be cleaned and recoated. Steel Coils (P) filed for suit. Lower court found for P. Defendants appealed in that lower court had improperly shifted the burden of proof to them to prove the steel cargo was not in good condition before it was loaded.Issue 1: Whether the lower court improperly shifted the burden to the D to prove that the cargo was in damaged condition. Holding: No it did not.Reasoning: COGSA requires P to establish a prima facia case that cargo was loaded in undamaged condition and discharged in damaged condition. Once P establishes this, then it is BoP on D to show that it was not their fault. BoL is prima facia evidence of the condition of the goods at the time of receipt by carrier. P had proved therefore their burden through the evidence supplied.Issue 2: Whether D had not taken the due diligence to ensure the steel would be properly stored during voyage, so that it caused rust, thus violating the contract.Rule: per Cogsa, carrier has a duty of exercising due diligence in making the vessel seaworthy and capable of performing the work at hand.Holding: they did not take due diligence.

Reasoning: If P has established the prima facia case, burden shifts to D to proved that they exercised due diligence to prevent the damage, or that the cause of the damage is an exception as set forth in 1304(2) of COGSA (perils and accidents of the sea and latent defects not discoverable by due diligence). Due diligence is efforts to make the vessel seaworthy means ensuring reasonable fitness to perform or do the work at hand. Issue 3: whether D could delegate inspection to ensure seaworthiness.Rule: Duty to exercise due diligence in nondelegable. Holding: they cannot per COGSAIssue 4: whether the reason for the damage is an exception.Rule: there are exceptions to duty of due diligence in certain exceptions, those being that the sea was perilous and latent defects caused damage and that due diligence wouldn’t have detected the latent defect in any case.Holding: Damage was not caused by exceptions.Reasoning: the minor bad weather is not a peril of the sea. The latent defect that D claims, the crack, appears that it was known to the D as they had tried to repair it. So they can’t claim it was a latent defect.Issue 5: whether Steel can sue Bay Ocean for negligence.Rule: Liability is limited to $500 per package unless a higher value is declared by the shipper. Parties to the contract are limited by this rule. This limitation can be extended to agents of the carrier if there is a Himalaya Clause which extends a carrier’s rights to its agents.Rule: A noncarrier can be held liable in tort ouside of COGSA if there is not a Himalaya Clause that extends a carrier’s rights to its agents.Holding: yes it can, negligence action not subject to COGSA limitation.Reasoning:

Bay Ocean chose not to make itself a party to the party charter, nor was it an agent of the boat, therefore its liability not limited by COGSA. It is not a carrier, therefore it is not limited by COGSA.

to be protected, Parties involved in ocean transport must have the carrier extend liability limitation via a himalaya clause in the contract of Affreightment.

COGSA has a burden shifting procedure. why does it give the plaintiff a break? the evidence and control of the ship is with the defendant in general. Therefore shift the burden to D.

Clean BoL is usually prima facia evidence except when the packaging is such carrier cannot visually inspect or when the perishable or intrinsic nature of the commodity cannot be revealed by the external packings

A peril of sea is not foreseeable and unavoidable. It is of an extraordinary nature or arising from irreistble force or overwhelming power which could not be guarded against by the ordinary exertions of human skill and prudence.

o The damage must result from the peril of the sea in order to be blamed.o bad weather is foreseeable and potentially avoidable

Caemint Food Inc v Lloyd Brasileiro – where goods shipped in packages that prevent carrier from observing damaged condition at time of loading, a clean bill of lading is not prima facia evidence for the P.U.S. v. Lykes Bros. – where because of the perishable or intrinsic nature of the commodity, the internal condition is not adequately revealed by external appearances, P has a considerable burden of going further to prove actual condition – a clean BoL or visual inspection of external container is not prima facia evidence.Jamaica Nutrition – COGSA imposes a nondelegable duty on the carrier to exercise due diligence to make the vessel fit for carriage. this is not abrogate by its covenant to also clean the vessel to the charterer’s satisfaction. Ie it does not waive the duty to perform if the other party signs off on the work.

American National Fire Insurance Co. v. Mirasco Inc  Parties: P: Insurance Co – American National and Great American

D: Mirasco

Facts: Mirasco shipped 3 products: Iowa Beef Products (IBP), Excel and Monfort. Mirasco’s SOP was to ship to one customer (Misr) who would then split the shipment for them and deliver to the other customers. While enroute to Egypt, decree was passed that required the shipments are labeled according to the decree on meat. Decree did not apply to the Excel and Monfort products. Egypt wouldn’t take it b/c of decree. Egypt offered to let them take out 10% per day to sort out the cargo and segregate the shipments so that not all of it would be undeliverable. Mirasco chose to return to US and sell it there. It took a major loss on the IBP when price went down. Terms of the agreement were that rejection coverage was for cargo that had been rejected by governmental authorities. However, exclusions to coverage include 1) loss of market, 2) if an embargo is announced while shipment is en route, insurer only liable for return freight and 3) mislabeling or for cargo that fails health standards.Issue 1: Mirasco had purchased rejection insurance from the insurers. Whether the cargo was rejected. Ie whether the policy covers what happened.Holding: not dispute of material fact that the cargo was rejected as defined by the policy. It was rejected and policy may apply.Issue 2: whether the policy exclusions of loss of market should apply.Rule: loss of market is when a certain type of product is no longer in demand with its intended purchasers, ie loss of customers. This is different than loss of market value.Holding: the exclusion did not apply, it was loss of market value.Issue 3: whether the cargo was rejected due to an embargo.Rule: an embargo is a governmentally imposed quantitative restriction of zero on the importation of merchandise. Kmart Corp v. Cartier. Embargos can be on products for having certain characteristics, such as adulterated or unapproved foods, and for not conforming to federal standards.Holding: This was an embargo, the decree meets the definition of an embargo. Insurer only liable for return shipment. This was stated in the contract as what the insurer would be liable for.

Queens Ins. Co of America v. Globe and Rutgers Fire Insurance Co. (US 1924) the US should look to English law for the applicable rules of marine insurance when there is no codified federal law that applies.

Wilburn Boat Co v. Fireman’s fund (US 1955)The USC ruled that, in absence of controlling federal admiralty law principle, the courts must apply the applicable state law rule.

This is in contradiction to Queens.Poor law due to hard case.

International Trade: Border Measures

Tariff Measures Tariffs are Revenue-generating trade barriers Determined according to product's classification, value and origin "Bound" levels (caps) fixed under GATT Art. II Observe "Most Favored Nation" Principle

o Regional trade agreements are exception (e.g., NAFTA, EU, MERCOSUR, etc.)

Non-Tariff Measures . . . Quotas →Numerical limits on certain imports Non-revenue-generating trade barriers Mostly Illegal under GATT Article XI

Export Bans or Restrictions →Limits on certain exportsIllegal under GATT Article XI However, there are (exceptions for conservation, etc.)

Sanitary and Phytosanitary Inspections/Certifications/EmbargoesWTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)

Technical StandardsWTO Agreement on Technical Barriers to Trade (TBT)

"Cultural" ExceptionGATT Art. IV (i.e., require the exhibition of domestically made films for a specified minimum proportion of total screen time)

U.S. Trade and Trans'l Controls: U.S. Trade and Trans'l Controls: Treasury's OFAC & Commerce's BIS Treasury's OFAC & Commerce's BIS

OFAC and BIS Regulations (re Transfers of U.S.-Origin Goods, Technology and Funds) often overlap

o Ban trade and investment with certain embargoed countries (e.g., Cuba)o Restrict certain transactions regardless of country of destination (e.g., proliferation,

WMDs) o Target Specially Designated Nationals ("SDNs") or individuals in the "Denied Persons

List"o Covered transactions can be prohibited or controlled (i.e., subject to export license)

Jurisdictional Bases Varyo Extraterritorial Jurisdictiono "Nationality Principle": acts of U.S. persons (i.e., natural or legal persons) anywhere

on the globe (includes U.S. residents anywhere)o Territorial Jurisdictiono Jurisdictional link: activity in the United States or utilizing an "instrumentality of U.S.

interstate or foreign commerce," whether or not physically present in the United States

o (includes foreigners in the U.S.) Any person in the US Controls prohibit evasion efforts Domestic transfers of technology to foreign nationals deemed as exports from the U.S. Any subsequent shipment of covered technologies or goods from any country treated as

direct export Knowledge requirements are strictly enforced

o Willful blindness does not exempt culpability What to look for?

o Triggers/Red Flags/Issue Spotters –Country of destination –Sophistication of items to be exported –Identity of end-user –Intended use

o Burden is on the exporter to determine whether a transaction is covered and to obtain an export license, if applicable

o Note: Foreign-origin goods or technology that enter or transit the customs territory of the U.S. can be treated as goods or technology produced in the United States

Other Statutory Authorities Other Statutory Authorities

Antiboycott Lawso DOC's Antiboycott Law:

Similar jurisdictional bases to OFAC/BIS stat. scheme Mandate non-compliance with foreign-issued boycotts—focus on actions U.S. persons subject to reporting requirement

o Treasury's Antiboycott Law: Status-based jurisdictional nexus: U.S. taxpayer Mandate non-compliance with foreign-issued boycotts—focus on agreements U.S. taxpayers subject to reporting requirement

Economic Espionage Acto Proscribed conduct applies to both U.S. and foreign personso Protected trade secret need not be controlled good or technology under the

OFAC/BIS regulatory schemeo Similar jurisdictional nexus: nationality principle & territory are bases for action

Foreign Corrupt Practices Acto Proscribes bribery of foreign gov't or int'l org. officials to obtain or retain businesso Similar jurisdictional nexus: nationality principle & territory are bases for action

The Sales Contract – Choice of Law:

Kristinus v. H Stern Com E Ind SA (SDNY 1979)Facts: Rainer, a cit of PA, went to Rio and bought three gems from Stern and Co in Brazil. Stern said it would guarantee a refund either in Brazil or in own country. VP of Stern also assured him that he could return the gems for a complete refund. He later asked for a refund one month later (Dec 74 – Jan 75) and was denied. suit is for specific performance on an oral promise to refund the purchase price. Stern moves to dismiss on ground that oral promises are unenforceable under the laws of Brazil where the transaction took place. The relevant law does not allow oral testimony without written documentation. The question before the court to address the motion to dismiss, is what law to apply.Issue: whether a NY court would apply Brazilian law or NY law.Holding: apply NY law – governmental interestRule: Federal court sitting in diversity must apply state choice of law. Klaxon doctrine USC Rule: New York court must balance New York’s interest in having New York law apply against a foreign state’s interest in having foreign law apply. Governmental interest approachTo determine the foreign state’s interest, can look at what effect it would have at:

1) protecting the integrity of the judicial process against the taints of perjured and biased testimony,

2) protection of persons who transact business in Brazil from unfounded contractual claims by requiring such claims to be enforceable;

3) foreign state’s paramount interest in regulating conduct within its borders. To determine New York’s interests, look at:

1) New yorks interest in ensuring that persons who transact business within its border honor obligations, including contracts made elsewhere;

2) what would NY do if the contract had been made within its borders.Reasoning: A New York court would not permit the defendant to make a contract and then use foreign law to avoid its obligations under the contract. NY has an interest in making parties to a contract honor those obligations regardless of where the contract was made. Brazil’s interests are not prejudiced here.Continental rule: validity of a contract is governed by the law of the place where it was formed. UCC provides that parties may agree on a choice of law where a transaction bears a reasonable relation to the state or foreign law. In absence of an agreement, the act applies to transactions bearing an appropriate relation to this state. This is called the Imperial Clause – allows application of US law by a US court in any case where the court, in its judgment, deems the transaction to have connection to that state.

NY substantive law applied because it balanced the interests of NY state interests in applying its own law and Brazil’s interest in applying Brazilian law

Also, formation of the contract – where? Debatable if it was in Brazil – the company is a NY company – conversing with a citizen of that country.

NOTE: CISG didn’t apply here because it was a sale for personal use

Restatement Conflicts of Law § 188 rights and duties of the parties are determined by the state law that has the most

significant relationship to the transaction and the parties in absence of express governing law look to:

o place of contractingo place of negotiationo place of performance

o location of the subject matter of the contracto domicile, residence, nationality, place of incorporation and place of business of the

parties

Convention on the law Applicable to Contractual Obligations: as applied to EU nations: contract to be governed by country with which it is most closely

connected. It is most closely connected with the country where the party who is to effect performance is located or does most of its business.

use of state choice of law in international cases is commonplace – some argue to apply federal choice of law analysis.

Overview of CISG

is uniform substantive law that applies in many cases w/o need for CoL analysis. where it applies, displaces domestic law. in US will displace UCC in ISC it only applies to international sales contracts of goods is not mandatory public law but supplementary private one terms of contract will override any conflicting terms in the convention it is not comprehensive contract law Governs:

o Part I: the formation of the contracto Part II: obligations of the parties to the contract

Reduces resorting to CoL analysis by displacing domestic law on those two issues On other issues, forum needs to look at K or other source of law to rule on other issues,

must make CoL analysis exclusions from coverage and does not apply in these situations:

o when parties expressly exclude from coverageo validity of the contracto third party rightso property rights in the goods

Where the parties have not agreed to domestic law and where CISG does not apply, courts will have to do choice of law analysis

CLOUT – international SICG cases published by UNICTAL secretariat UNILEX – another case service.

Sphere of Application of CISG

contract is international is when the parties have their places of business in different contracting states.

If the action is brought in a third country which is a member, CISG will govern so long as the parties are international and they have not expressly opted out of CISG.

If an action is brought in a third country, not a signatory o CISG will apply unless its application will violate a basic public policy of the forum. o when 1 and 2 entered into CISG – made an implicit choice of law and 3rd country

should give effect to the choice of law by parties Article 1(1)(b)

o It allows a State to opt out of this provision through making an Art 95 reservation. Substance of this is that domestic law is not automatically displaced.

o US didn’t want it, got the opt out in Art 95 instead. o fear was that when one contracting party that was not a signatory, that language

would displace US law and not displace the law of foreign non-contracting states.

Convention does not apply to Certain sales:

(a) of goods bought for personal, family or household use, unless the seller, at any time

before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction;(c) on execution or otherwise by authority of law:(d) of stocks, shares, investment securities, negotiable instruments or money;(e) of ships, vessels, hovercraft or aircraft;(f) of electricity.

CISG applies to instruments that give bearer title to goods (BoL)

CISG Application

when both parties are from contracting states when one party is from a contracting state, either the CISG or the domestic law of the non-

contracting state applies under subparagraph (1)(b) when one party is from a contracting state and the state has excluded (1)(b) through

declaration under Art 95, either domestic law may apply. where domestic law would apply CISG

CISG CoL Provision is Triggered Art 1(1)(b) when either buyer or seller is not a signatory US opted out. CISG will not apply, either domestic law will apply.

UNIDROIT Principles of International Commercial Contracts

principles are not legally binding except when:o parties expressly agree to be governed by themo parties agree that contract will be governed by general principles of international

commercial lawo domestic law is unable to provide a solutiono can be used as supplementation or interpretation

applies to all commercial transactions

III.C. Scope of the Contract

Amco Ukrservice & Prompriladamco v. American Meter Co. 2004 EDPA

Parties: P: Amco and PromD: American Meter Co

Procedural history: P filed action seeking over $200 mil for breach of two joint venture agreements entered into with D. Court merged the two complaints from the two Ps. Parties filed cross-motions for summary judgment. American Meter assertion: entitled to judgment as a matter of law because the joint venture agreements are unenforceable under both CISG and Ukrainian commercial law. P –asserts agreement is enforceable, no genuine issue of material fact as to breach, and only remaining issue is the extent of damages.Facts: American was approached to market its products in Ukraine. They formed joint ventures with Promprilad. The first agreement established a joint venture company with 4 parties. Based on the agreement, American had several obligations: to grant rights to the JV Co to manufacture, install, and distribute; that Am would deliver components and parts; JV Co would perform 10% of assembly while Am would do 90%. This JV to help push legislation through to give the products an advantage in the Uk market. 2nd Agreement to form a 2nd JV Co, Amco – for the purpose of marketing the gas piping products of Perfection Corp, a subsidiary of Am. Both JVs sent POs, but Am president stopped shipments and refused to extend credit to either JV for reasons of unstable business conditions and eroding investment confidence. Defendant’s argument: Get CISG to apply. Then said that the agreement was not sufficiently

definite to material facts, price quantity. This is not a dispute over the sale of goods, it is a dispute over the distributorship agreement. Issue 1: American’s Motion for SJ that contract is unenforceable under CISG. [The Ds want CISG to apply because the agreement is a distributorship agreement and is outside the scope of the CISG]Rule: CISG does not apply to distributorship agreements (framework for future sales of goods, but do not lay down precise prices and quantity terms). Helen Kaminski v. Marketing Austrialian Products.Rule: but it does govern sales contracts that the parties enter pursuant to those agreements.Holding: Although CISG may have governed discrete contracts for the sale of goods that the parties had entered pursuant to the joint venture agreements, it does not apply to the agreements themselves. Am is arguing that the supply and credit provisions are severable and governed by the CISG. The CISG says that where there is no definite price and quantity, the proposal is indefinite and therefore unenforceable. CISG does not govern at all. Court found that PA law governed. Court doesn’t like the use of CISG by D ∵ of inequitable result. Seller can compel buyer to perform, however, buyer will not have no such argument, seller can always say that no contract ∵ not definite.

When CISG ever apply? Only when seller wantedWhy is it impossible for CISG ever apply on these facts, to a framework agreement?

require specified goods for CISG to apply to an agreement

What change would be required to make the agreement apply? ship the goods and let the dispute arise. You must have an issue arise that will let CISG to

apply. Does not apply to the framework agreements, but applies to transactions of goods that

result from the framework agreements, so long as can infer practice, prior usage, definite terms.

Why does PA law apply here? that Prendergast, had the actual or apparent authority to make the commitments on behalf

of American and PA is his place of business. Once found that CISG didn’t govern, had to go to private international law analysis This is Diversity of Citizenship case – P is Ukrainian, D is US. Could only make this a federal

question if it asked for declatory judgment and well pleaded complaint thing. What law applies? Can’t be federal law b/c of it’s a contract issue – an unenumerated issue.

Therefore must be either state or foreign law The court found some reasons for foreign law not to apply.

Things to Note: Meter lawyers failed to put in a governing law provision – don’t forget to do this! You are an advocate for your client’s rightsErie/Klaxon prohibits forum shopping for rules most favorable to your case

UNICITRAL CLOUT Case 131 – CISG is applicable when the parties have their PoB in different CISG contracting states and the SICG applies to agreements for the sale and delivery of software. When the parties have agreed on the particulars of the sale (ie expressing definiteness), a sales contract has been concluded.

CISG may apply to: Discrete contracts to the sale of goods pursuant to such agreements Software – but you need some good – like a disc or some other fixed medium, can’t just

download it off the web. Goods to be produced, can be seen somewhat as a service – but services aren’t included.

o If an overwhelming portion of the contract is the provision of services, will be considered a service

o ie when you provide all the machinery, and you generally provide all the means for

production, it wil be considered a service. CISG applies to the BoL to the things above because – the portion of the transaction BoL

takes care of is delivery in the sale of goods.

UNICITRAL CLOUT Case 122 – CISG is not applicable to a contract that is not a contract for the sale of goods or production of goods. A characteristic of sale of goods is the transfer of property in an object. The object here is a marketing report, while on paper, is a transfer of the right to use the ideas on the paper (is this a copyright issue as well?). Gap vs. Exclusion

Gap – interstitial issue that the CISG does not addresso go to general principleso then to PIL and then domestic law

Exclusion – when the CISG excludes an issue from scope of coverageo No need to look at general principleso go directly to PIL substantive law

CISG General Principles

requirements for good faith and reasonableness 7(1) reasonableness – circumstances to be interpreted by reasonable person standard Art. 8(2)

& (3) primacy of contract and freedom of contract (6) generally no formalities (11) presumption of a binding contract (16, 18(1), 19(2), and 21) general rule against formalities

o statute of frauds – don’t need writingo parol evidence – can look at parol

due consideration is to be given to all relevant circumstances of the case. MCC Marble Ceramic Center 11th Cir 1998. said that parol evidence rule should apply – applied CISG analysis

Beijing Metals v. American Business. TX court applied TX parol evidence rule in a suit between a TX businessman and a Chinese seller. Said that the parol evidence rule applied regardless of whether TX law or the CISG applied. Why?

It was a gap issue – on why would first go to general principles, would never get to domestic law if go to general principles, which covers it.

o consideration – don’t need parties may vary the convention and displace domestic law. Art 6 exception to art 12 – parties cannot abrogate the writing requirement if it is mandatory law

in the signatory country.o The writing is public law. Parties cannot abrogate public law/mandatory law.o However, if sovereignty (mandatory) law is implicated, you can’t vary

Stock swap – as long as a public mandatory law regarding securities isn’t drawn in.

What about Article 1(1)(a)? Can parties opt-in? Sure. Art 7 refers to gaps

GPL Treatment, Ltd v. Louisiana-Pacific Corp, Oregon S Ct. 1996

Facts: P (Canada) sold raw shakes to US company. D denies entering into sales contracts. D moved in limine for dismissal re: failure to satisfy statute of frauds requirement of a writing. P raised during trial that CISG instead of UCC governed [this was not timely, therefore argument was waived].

Judge said that plaintiff’s “waived” fed law – CISG.

Court should not take judicial notice when both parties have opted out of CISG. The court found that P satisfied the UCC statute of frauds requirement for a writing. Found

for P. P awarded damages. Can take notice of PoB – unless the parties opted out. P’s lawyer would have been sued for malpractice if they didn’t win for not raising timely

argument on applicability of CISG Fully adjudicated – issue preclusion – it had been already decided.

Article 12: contracting party w/ PoB in state can preserve a writing requirement by declaring under Art 96 that Art 11 does not apply. PoB in place where litigation being held.

III.D. Formation of the Contract

is subject to the rules of Art 1013 (Pt I), interpretation of the contract is independent of Pt III, rights and obligations of the parties can declare under 92 that it exclues Part II or III. 14 – 17 – offer withdrawal – 15 revocation – 16 termination of an offer – 17 acceptance – 18 effect on an acceptance that varies the terms of the offer – 19 time allowed for acceptance – 20-21 withdrawal of acceptance – 22 time when contract is concluded – 23 and 24.

Offer – Article 14(1) offeror must intend to be bound by offer must be a definite offeree – ie name specific people or entities and general definiteness of the offer in price and quantity; failing this, a prior course of

dealing indicating quantity and price may be sufficient. If accepted with definiteness and intent to be bound, this is a contract

Withdrawal Art 15 offeror has power to withdraw an offer any time before the offer reaches the offeree, even if

the offer is “irrevocable” – generally is an offer that is mailed or not yet seen by the buyer

Revocation Art 16 offeror has power to revoke even after it has sent the offer and before it has been accepted.

o unlike C-L, which says promise is irrevocable after consideration has been given or an option has been created.

o C-L mailbox rule: when the offeror has authorized offeree to respond by mail, offeror cannot revoke an offer even if consideration has not been given.

o UCC – firm offers – when offer made by a merchant and claims is irrevocable.o Art 16(2) – it cannot be revoked if it states that the offer is not revocable within a

period of time or when it was reasonable for the offeree to rely on offer as irrevocable and offeree has acted in reliance on the offer

Certain offers are not revocable, even if consideration has not been given

Acceptance (18)

- Acceptance = Assent + Communication or “Other Contact”- Battle of the form – the last shot is the one that the last person sends and is not objected to by

the other party, the nonmaterial differences and additions are considered part of the contract.- CISG allows the last shot to prevail if it’s not a material change and the other party performs or

conduct constitutes acceptance.

- The common law – mirror image approach. If one change, no contract.- UCC approach – tries to save contracts – says there is acceptance, but only of those terms and

conditions that agree. The other terms are knocked out.

FILANTO v. CHILEWICH Intl Corp. Proc Hist: Plaintiff Italian corporation moved the United States District Court for the Southern District of New York to enjoin arbitration or to order arbitration in its federal district. Defendant New York corporation moved the court to stay the present action pending arbitration in MoscowFacts: Plaintiff Italian corporation Filanto entered into an agreement with defendant New York corporation Chilewich where it would provide shoes. The shoes would be used to satisfy an agreement between defendant’s agent Byerly Johnson and a Russian company, Raznoexport. After a disagreement between Chilewich and Filanto, Filanto brought this action seeking to enjoin the arbitration required by the Russian Contract between defendant’s agent and the Russian company or to order arbitration in New York. Defendant moved the court to stay the present action pending arbitration in Moscow. Issue: whether there was a contract in the first place.Defendant’s Arguments: That a binding contract had been created by performance and that the letter that excluded the term was not timely and was a proposal for modification. It was rejected, therefore P was bound by the terms of the contract. P’s Argument: that their letter was a rejection of the offer and constituted a counteroffer.Holding: The court issued a mandatory injunction to arbitrate in Moscow and held that because plaintiff Italian corporation was bound by the terms of the memorandum agreement entered into by plaintiff and defendant New York corporation, it was also bound by the arbitration clause, which stated that any arbitration would be in Moscow. Reasoning: Court finds that the Plaintiff’s actions constituted acceptance and that there was a sufficient agreement in writing to arbitrate disputes between the parties. The P had opp to object, but did not do so in a timely fashion. It had multiple opportunities to object, but failed to.

NYS law would have never applied because of the supremacy clause. Pratt & Whitney v. Malev Hungarian Airlines (1993)

Facts: Sale of goods to sell replacement airplanes engines. The problem was that quantity and price would be determined by the type of airplane that Malev would buy. They signed a letter of intent, and PW submitted two purchase support offers for each type of plane that Malev might purchase. Malev, instead of signing the offers, sent a letter saying that it had selected the PW 4000 for the new aircraft. Said that the letter relied on the conditions in the purchase support offers. Malev chose the Beoing aircraft, but did not buy replacement engines from PW. PW sues for breach.P’s Argument: that the offers were definite because the parties could determine based on the aircraft type the number of engines and the price.D’s Argument: that the offers were not definite because there was neither quantity nor price on the offers and that they could not be determined by the offers themselves. Also, Malev didn’t perform under the contract, such as buy finalizing the contract.Holding: there lacks an appropriate explicit offer from plaintiff and no clear indication as to the subject of the service in Defendant’s declaration of acceptance, therefore no sales contract had been established between the parties.Reasoning: Malev had agreed to buy a jet engine system – whereby MHA would pay the aircraft manufacturer for the cost of a complete plane and the manufacturer would then pay PW for the cost of the engine. PW didn’t include price or quantity of the engines and didn’t find that it’s argument that a determination of price and quantity could be made based on the selection of the aircraft. The deal was insufficiently definite and did not constitute an offer.An offer must be definite as to price and quantity. When there is no offer, there is no contract.

Performance of the Contract

Performance based on three elements:

1. delivery2. conformity of the goodspayment

Delivery

Seller, to satisfy its delivery obligation must:fulfill the contract requirementsif contract silent to delivery at any other particular place, then Article 31 of CISG applies:

sale is carriage of goods – to hand over the goods to the first carrierin other cases where goods are to be drawn from stock or to be manufactured, and where contract relates to specific goods, place is where the goods are located or manufacturedin other cases, place of seller’s business.

CISG applies to supply obligations in absence of agreement on delivery, insurance, and risk of loss.

Conforming Goods

- Seller has obligation to deliver goods that meet reasonable expectations- Buyer expects at minimum to deliver goods that conform to the contract in quality, quantity

and condition- Where contract is silent or does not resolve an issue related to to confiormity of goods,

buyer still has reasonable expectations governed by domestic law- UCC has law dealing with three types of warranties, ie obligation of seller i

o § 2-313 Express warrantyo § 2-314 Implied Warrantyo § 2-315 Implied warranty of fitness for a particular purposeo § 2-216(2) implied warranties can be disclaimed while express cannot.

Note: CISG has the force of law because it’s self-executing. Therefore it is self-enforcing. The actual basis of jurisdiction should have been federal question.

Medical Marketing Intl Inc,(MII) v. Internazionale Medico Scientfica (IMS) (Conforming Goods)Facts: P-MII – marketing corporation with PPB in Baton Rouge. D: IMS manufactured radiology materials in Bologna, Italy. The entered into a Business Licensing Agreement which IMS graded exclusive sales rights for some sort of mammography machine. The FDA seized the equipment for noncompliance with administrative procedures. Dispute arose over who had responsibility to make sure the equipment was in compliance. MMI demanded mediation. When that failed, they went into arbitration per Article 13 of the GMP, finding for MMI – damages of 357,009. IMS moved for reconsideration, P is now moving for order to confirm the award and enter judgment in favor of P.IMS Argument: that arbitrators misapplied CISG and did not follow a German case interpreting CISG.MMI: does not dispute CISG.Issue: whose obligation it was to ensure that equipment met with FDA regulation. whether MMI could properly avoid the contract through application of CISG Article 49, fundamentality of breach.Holding: It was IMS obligation. YesRule: 1) must evaluate the international character of convention and promote uniformity in application (ie must agree with precedent). 2) goods conform if they a) fit purpose for use or b) fit for any particular purpose express or implied to seller and relied on by buyer – Art 35(2). (3) To avoid a contract, seller’s breach must be fundamental in nature – Art 49. (4) A breach is fundamental when it results in such detriment to the party that it is substantially deprived of what was it was entitled to under the contract, unless the party in breach did not foresee such a result – Art 25.

Rule 2: A seller is not generally obligated to supply goods that conform to public laws and regulations of the buyer’s countries, except in cases where (1) the public laws of both seller and buyer’s countries are the same, (2) buyer had informed the seller about those regulations, or (3) if due to special circumstances (existence of seller in buyer’s country), seller knew or should have known about the regulations at issue. Decision of the German Federal Supreme Court of Civil Affairs. 1995.

Reasoning: This court agrees with the arbitration panel. The panel had decided that IMS knew or should have known about the regulations; therefore the general rule would not apply. There was enough evidence to support that IMS knew or should have known. The D’s argument holds no water b/c CISG is being followed, including the German decision.

- Conforming good case. Implied warranty of fitness for a particular purpose. Judge held that the implied warranty was good.

- If I was buyer – MMI – how would you draft the contract? That there is an express warranty – to opt in to all of CISG

- 35(2) – the court relies on this. The court does not want to get into detail. The seller is not within the German court’s understanding.

- If this case went to 5th cir, it would be in big trouble. By implication, the court says 35(2) is relevant – implied fitness rule.

- If you are the german seller- you would opt out of 35(b), under article 6 you can do that, and then expressly disclaim the implied warranty. You need to fill the gap too, you don’t want UCC to apply. Implied warranties may be disclaimed in UCC. Express warranties cannot be disclaimed.

- Must also disclaim the UCC.

BP v. Empresa Estatal Petroleos de Ecuador 5th Cir. 2003 (Lack of Conformity)Facts: BP sold gas to PetroEcuador and arranged for its transport to Ecudaor. PE refused to accept delivery because the gum content in the gasoline exceeded the contractual limit. PE had hired Saybolt to ensure the requirement was met at the port of departure. However, when the gas arrived in Ecuador, it retested and found the gum now exceeded the contractual limit, so it refused to accept delivery. It cited lack of conformity as the breach. BP eventually resold with loss of 2 mil. Proc Hist: BP sued. PE filed a notice of intent to apply foreign law, so district court applied TX choice of law rules and decided Ecudorian law governed and held that the seller must deliver conforming goods to the agreed destination, Ecuador. Lower court granted summary judgment for PE.Issue: When did the buyer assumer risk of the shipment? Rule: Even if usage of Incoterms is not global, the fact that they are well known in international trade means that they are incorporated through article 9(2). CFR is such a term. In CFR shipments, seller is to pay costs and freight to transport to delivery port, but pass title and risk of loss to buyer once goods ‘pass the ship’s rail’ at the port of shipment. Goods should be tested for conformity before risk of loss passes to the buyer. Art 36(1). In such a case, subsequent loss or damage should be sought against the carrier or insurer.

However, as an exception to this rule, the seller can be liable if it knew or could not have been unaware of the lack of conformity of the goods. Therefore, the buyer may rightfully avoid the contract if this is so.

Reasoning: here, it is still an issue of material fact whether BP knew, or should have known about the hidden defect, the high gum content. It bought the oil from Shell in “as is” condition and didn’t add gum inhibitor as it should have.

Issue: Whether BP could sue Saybolt for negligence and breach of contract for improperly testing the gasoline, which led to the failure of the earlier contract.

Reasoning: if BP wins its suit – then PE becomes the party with a potential claim. If BP knowingly sold gasoline with high gum content, it cannot say that Saybolt’s testing was the proximate cause

of BP’s injury, since BP is the proximate cause for that injury – the refusal of the gas.

Disclaimer of Warranty

CISG is silent on the disclaimer of warranty. In a case is governed by CISG, UCC may be used to decide an issue excluded from the scope of the CISG.

UCC § 2-316(2): in order to properly exclude the implied warranty of merchantability, the language must mention merchantability and be conspicuous. An exclusion of the implied warranty of fitness for a particular purpose does not need to mention the warranty, can be done in general language, but the disclaimer must be in writing and conspicuous.

This will depend on how the court interprets this rule. If they see it as a rule of validity, UCC will apply as issues of validity are excluded from scope of the CISG Art 4(a).

If it is a rule of interpretation, it is superceded by Art 8(2) – the rule on interpretation.

- The nonconforming issue is the gasoline – the gum content was too high.- BP’s CFR argument: that once gas passed the rail, risk passed- It’s CISG argument: PE had performed due diligence to discover lack of conformity – hired a

third party to test the gas. Therefore, Art 39 comes in. They had a reasonable amount of time to discover the problem.

- PE: says that 39 does not apply because the seller knew or should have known about the hideen defect – Art 40.

- For this to be sussed out, this is a genuine issue of material fact. Therefore should be remanded and reviewed on this issue only. That is why summary judgment was improper.

- Next step in the analysis after is it a sale of goods – then decide what law to apply. - In this case, the federal district court went to diversity to decide choice of law.

Payment by BuyerBuyer’s basic obligation: TO pay the price.

Unilex, D 1995-1, France

French buyer ordered components from German seller. The order specified that the final purchase price would be revised based on market prices and that the goods would be delivered at certain dates. Buyer cancelled some components while the goods were enroute. Seller protested, saying he had already performed. When delivered, buyer rejected the goods in excess. Seller refused and demanded payment.

Court ruled that the revision of price according to market trend was sufficiently definite, which made it a valid offer, not just a proposal.

buyer’s bound when there is an offer that expresses sufficient definiteness in regard to price and quantity 14(1). If there is acceptance, either express or through seller’s conduct, there is a contract. The price paid must be the at price should he pay? Market price at the time he shipped

Excused Performance

Doctrines of frustration, impossibility, and force majeure in domestic courts.- War, government prohibitions, unavailability of transport routes, strikes, fire, and economic

conditions. - Art 79 of CISG allows an excuse for failure if it was due to an impediment beyond his control, if

seller could not reasonably been expected to taken the impediment into account at the conclusion of the contract or have been able to avoid it or overcome it or its consequences.

- It is not an impediment to performance when an event makes performance more difficult or costly.

- It is not an impediment if some part of it was reasonably foreseeable (having some knowledge

of the circumstances that lead to the impediment).- It is not an impediment if seller refuses to overcome it, ie compensate for loss, find a

substitute, etc.- If seller is excused, buyer cannot sue for damages, but can avoid the contract. Can get

restitution for what it has already paid. Seller does not have to deliver the goods.

Tsakiroglou v. Noblee Thorl House of Lords, 1962

Facts: Tsakiroglou = seller. Noblee, buyer. Buyer sued for breach for failure to perform. It had bought Sudanese groundnuts from sellers. Nuts to be sold from Sudan to Hamburg. Unclear if the contract stated, but both parties believed to be shipped in the normal route, Port Sudan – Suez Canal – Hamburg. Suez Canal closed due to military operations against Egypt. Sellers could have transported the nuts via Cape of Good Hope, but did not. The shipping expense would have been greater. Price of nuts went way up too. Sellers didn’t ship.Issue: Whether the sellers were excused from performance. Holding: no, it was not.Rule: Contract clause 6, force majeur clause that in case of war, blockade that prevents the shipment within time fixed, period for shipment shall not extended beyond two months. After 2 months, contract shall be cancelled. Force majeur is a legitimate reason for failure to perform. Was the contract frustrated by the event?Reasoning: no act of war or force majeurii took place and prevented the shipment from occurred. Also, there was no implied term within contract that the nuts to be shipped via Suez, therefore contract could still be performed if went by Cape of Good Hope. The contract was not frustrated. The contract did not imply a term of shipment through Suez, this was not mentioned while the specific ship date was mentioned – they just wanted it shipped, showing they didn’t care about transport.- seller must bear the cost of transportation – it’s a CIF contract, it is responsible for

Affreightment. - Why is this a CISG argument? If it was an implied term of the contract – an impediment would

make it impossible to fulfill the contract according to the implied term. Therefore, could not overcome.

- However, if it is not an implied term, then it is not an impediment.- The seller’s best argument could have been a blockade.

Performance Delegated to a Third Party

Art 79(2)(a) and (b). The seller is exempt from liability if it was exempt under 79(1) or (b) if third party is excused from performance 79(1)

Unilex, D1996-3.4 Germany

German buyer bought from Hong Kong seller who bought from Chinese manufacturer. They made a contract, terms were delivery and ordering were variable, payment within 90 days but in some cases in advance. Seller asked for advance payment because of problems with Chinese manufacturer. Buyer refused. Seller asked for damages for breach.

Court found that the seller refused delivery unless he got advance payment. This was not a term in the sales contract. Seller was not exempted for performance because the failure was not an impediment beyond it’s control.

Remedies

- Basic approach – to view the relationship between buyers and sellers as a cooperative one and to preserve and maintain such a relationship. The remedies are more to remedy, repair or cure defective performance rather than to punish.

- To view relationship between seller and buyer as a cooperative relationship, one to preserve and maintain.

- CISG consider that both parties have a stake in preserving the business relationship, so used to remedy repair or cure a defective performance than as a weapon of punishment.

- Remedies of the Sellero Art 61-65o Art 72-72 – damages

- Art 25 – defines fundamental breach.- Remedies of the Buyer: 46-49- Anticipatory Breach and Installment Contracts

Overarching philosophy when it looks at remedies: to preserve the relationships.Leads to remedies that allows breaching party to cure the relationship. Litigation and arbitration are very expensive – should be the last resort.

Treat the contract as “avoided” if there has been a fundamental breach. In practical terms, the seller should present the documents to the bank to get the letter of

credit.o What if the bank rejects? Sue the bank, for wrongful dishonor of the letter of credit.

Can seller avoid the contract if he’s collected on the letter of credit? Noo 64(2) – only in a couple exceptions

Avoid the contract, then sue on the contract

Problem 3-20

Can sell to the new buyer and sue old buyer for balance of contract in damages.

$60*3000=180,000 on the open market.

Why is the buyer pulling out? He’s got financial problems. He might be jdugemnet proof. What would you advise your client? Could Sell and Sue. Or Sell Direct – no damages.

Buyer’s Remedies

Problem 3-22

Time is of the essence clause. What to do?

Compel performance – though it would seem difficult if not impossible to compel performance

Give more time. 2 days doesn’t look like much problem Or avoid the contract for fundamental breach – time is of the essence

Give more time – in line with CISG goal to preserve relationships.

What if the seller shifted the production to fulfill another contract, and he was late because of this reason?

What if goods unique: specific performance

Problem 3-24

He should accept the cure. However, he doesn’t have to. Art 48 – noncompulsory to accept cure.

Can he avoid the contract? I don’t think so, no failure of substantial performance by seller. Buyer must be substantially deprived of its expectations.

There’s a cure available, it’s substantial performance.

Also, could give the seller more time to fulfill the obligation.

There are symmetrical obligations on buyer and seller.

Seller’s Remedies

Problem 3-19: buyer didn’t specify blue pens.

What are the Seller’s remedies? compel performance

o in US courts, to compel specific performance, the good must be uniqueo to compel performance is an equity remedyo in an equity remedy – that you cannot be made whole any other way, there is no

alternative remedy, no other means of redresso Here, in this case, the goods are already in the seller’s hands, there is no other

alternative remedy. In a case like this, court, instead of compelling performance, ask to sue for damages

Give extra time to cure the problem.

- Seller’s Obligation: Deliver goods as described in the contract- Definition of casual contract: an oral contract – still have to determine the elements of

formation exist – ie offer, acceptance.

Analysis to Contract:1. Initial inquiry: was a contract formed?2. Where the contract terms complied to? 3. Follow the Contract Terms4. If the contract is silent as to specific duty/term, go to CISG Article 31

a. Delivery specified in 33(a)b. Transportation specified in 31(2)c. Risk of loss – Art. 67 Risk passes to buyer when it is delivered to first carrier.d. Loss during transportation: risk passed to buyer already.e. Insurance. Seller ought to have insurance to cover his risk and buyer his part.

CISG applies even though they had not mentioned it.

Anticipatory Breach & Installment Contracts – Art 71-73

Anticipatory breach – before the duty to perform attaches

Installment K – contract that prescribes performance obligation that can be filled in batches or payment in installments.

Problem 3-26

suspend and give notice (Art 71) – when after signing the contract but before performance that one party will not be able to fulfill its obligation. It must be clear. Obligation to give notice – the party suspending performance must give notice – Art 71(3)

can also avoid the contract, sue for damages Does Art 73 require you to give notice? No, it does not. Party to avoid the contract does

not have to give notice to the other. Do not have to avoid, give notice, and then sue for damages.

Problem 3-27

Installment contract: what should you advise your client? give more time

You probably only want to avoid at the last resort. If you want to preserve the relationship – this is only if you don’t want to do preserve the relationship.

In installment plans – you may choose to avoid for that particular installment.

Letter of Credit

Two sources of law, the UCP and UCC.

i § 2-313. Express Warranties by Affirmation, Promise, Description, Sample.

(1) Express warranties by the seller are created as follows:(a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.

(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.

§ 2-314. Implied Warranty:  Merchantability;  Usage of Trade.(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.  Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.(2) Goods to be merchantable must be at least such as

(a) pass without objection in the trade under the contract description;  and(b) in the case of fungible goods, are of fair average quality within the description;  and(c) are fit for the ordinary purposes for which such goods are used;  and(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved;  and(e) are adequately contained, packaged, and labeled as the agreement may require;  and(f) conform to the promise or affirmations of fact made on the container or label if any.

UCP- UCP applies where they are incorporated into the text of the credit.- UCP is completely silent on the issue of fraud as defense to payment of the letter of credit.

Domestic law will decide on this issue

UCC- UCC § 5-103(c)1 allows for UCP to apply in exclusion of the UCC-

Letter of Credit Operations- Letter of Credit Basics: applicant and beneficiary- Documentary Credit- Bank is involved b/c it gets a fee, a % of the deal perhaps.

1 #§ 5-103. Scope.#(a)  This article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.#(b)  The statement of a rule in this article does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this article.#(c)  With the exception of this subsection, subsections (a) and (d), Sections 5-102(a)(9) and (10), 5-106(d), and 5-114(d), and except to the extent prohibited in Sections 1-302 and 5-117(d), the effect of this article may be varied by agreement or by a provision stated or incorporated by reference in an undertaking.  A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this article.#(d)  Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.

(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

§ 2-315. Implied Warranty:  Fitness for Particular Purpose.Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

§ 2-316. Exclusion or Modification of Warranties.(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other;  but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous.  Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."(3) Notwithstanding subsection (2)

(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty;  and(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied

- In the transaction, the most important bank is the issuing bank. - Payee – the beneficiary – the party entitled to payment. Sometimes can be the seller. Seller

could sell the letter of credit to someone else to pay a debt, etc. So can be an endorsee of seller.

- Applicant – party who established the credit. Sometimes is the buyer. Sometimes the parent company. Sometimes is another party that owes money to the buyer.

- Confirming Bank: Assume an obligation to pay. They are the seller’s bank. The issuing bank engages the confirming bank, or the seller may say that they want to use this bank.

- Nominated bank – bank engaged by issuing bank, but is not obligated to pay under the letter of credit.

- Advising Bank: don’t have an obligation to pay. It is to make reasonable efforts to tcheck the authenticity of the credit that it advises. They tell seller that letter of credit has been opened. They have a notice obligation. That is where their obligation stops.

Maurice O'Meara Co. v. National Park Bank, 239 N.Y. 386 (N.Y. 1925)Facts: Ronconi & Millar assigned their rights to the letter of credit to P. P ad attempted to collect on letter of credit. L/C required 3 documents, which P ad provided, but D-Bank said that the paper was not satisfactory because it did not furnish evidence of the tensile strength of the paper.Issue: Whether supplying the documents were sufficient to satisfy the requirements of L/CHolding: Yes.Rule: When bank agrees to pay to a certain amount on presentation of documents specified in the letter of credit, it mustAn obligation to present documents is satisfied when the documents meet the required description in the L/C.Beneficiaries of the letter of credit must be parties to any modification for the beneficiary to be bound by such obligations. Is otherwise unenforceable.Damages are the amount due to the seller less what it did to minimize the damage. When S acts in good faith or with reasonable care or diligence in minimizing damages, it is due what is owed on the drafts.Reasoning: - It was under no obligation to ascertain, by personal examination or otherwise, whether the

paper conformed to the contract between the buyer and the seller. The extent of the bank’s interest is to be concerned about the documents given in support of the L/C. It is bound to make the payment whether it knew, or had reaons to belive, paper was not the quality contracted for.

Primary purpose of the L/C is assurance to the seller of prompt payment against documents.- A provision giving such a right, or imposing such an obligation, can be provided for in a letter

of credit, however, it did not in this case.

warranty with regard to defects which an examination ought in the circumstances to have revealed to him;  and(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

ii A higher force; an irresistible force. An event which cannot be definitely foreseen or controlled. The test of "vis major" is whether under the particular circumstances there was such an insuperable interference without the party's intervention as could not have been prevented by the exercise of prudence, diligence, and care; and, unlike an act of God, it may consist, for instance, of governmental intervention resulting from the necessities of war.

- It is owed what is left remaining of the drafts after the resale b/c it acted in good faith. Did not have to procure the best price, only requirement to act in good faith.

- Cardozo dissent: Bank does not have a duty to investigate, however, banks, if it uncovers fraud, should do something about it. bank should be able to recover if has been misrepresentation. He also thinks that bank has a duty when it suspects fraud.

- Here’s where Cardozo is wrong. A bank can’t litigate on behalf of the buyer, act as if it is the buyer. The injured party is the buyer, not the bank.

- Comments: The bank acted perhaps to protect the buyer – but it deters good business and any future business with other parties including seller

- Court applies NY contract law – accord and satisfaction (go look this up)- What is the correct measure of damages? To make the buyer whole.- Cardozo – he says that O’Meara bought the LC knowing there was fraud. Bank is litigating on

behalf of the buyer.- (inapposite) adjective:   of an inappropriate or misapplied nature

JH Rayner v. Hambro’s Bank, Ltd. 1 King’s Bench 37 1943

Facts: Buyer asked Bank to provide irrevocable sight credit expiring June 1, 1940. Said that documents to provide have certain requirements, ie provide cormandel groundnuts in bags. Seller provided all the documents, but the documents differed from the requirements of the L/C, ie BoL said that bags contained machine shelled groundnut kernels origin India. The bank refused to pay b/c the documents materially differed.Issue: Whether the difference in the description of the product would be materially different from the requirements of the L/C.Rule: The drafts with the accompanying documents are to be in strict accord with the credit as opened. No room for documents that are almost the same, or which will do just as well. Holding: Bank was correct in its actions.- Reasoning: even though the correct trade terms were used and people in the nut industry

would know that each meant the same thing, the bank doesn’t. Bank under no obligation to be affected with the special knowledge of all contracts. Bank cannot take it upon itself to decide what will do well enough and what will not. If it does as its told, it is safe. If it takes no action, it is safe. If it departs from the conditions laid down, it acts at its own risk.

- Bank is obligated to comply with the terms that B sets out. Also have to question, what promise did bank make to the beneficiary of payment of credit? Beneficiary is obligated to avail himself of that promise by complying with the terms.

- Note: bank can waive a discrepancy, but it will do so at its own risk. May ask to waive.

Hanil Bank v. P.T Bank Negara Indonesia (SDNY 2000)Facts: P Bank – Hanil, purchased a letter of credit from Beneficiary Sung Jun Electronics. BNI, issuing bank issued LC but misspelled the name. When Hanil attempted to collect on LC, BNI refused b/c of the discrepancy and then also found 3 more. Both parties motioned for summary judgment, claiming no issue of material fact.Issue: Whether BNI was correct to reject the documents for discrepancies and not to pay.Rule: Since parties agreed to accept the provisions of UCP, then it governs. Fundamental obligation of bank to pay upon submission of documents which appear on their face to conform with the terms and condition of the letter of credit is absolute, absent proof of intentional fraud.Discrepancies that mislead or prejudice the bank is a nonconformity.Where internal discrepancies or ambiguity are created by the issuer, the ambiguity will be resolved agains the issuer.Incumbent upon beneficiary to check if LC is correct. It is beneficiary’s responsibility to discover error in the LC.UCP allows bank to approach the payor for waiver of any discrepancies with or without the beneficiary’s approval UCP Art 14(c). Is not a violation of good faith or fair dealing.Holding: the documents did not conform, don’t have to pay.Reasoning: Here, the discrepancy was misleading and so bank did not have to pay. The inconsistency, while created by the bank, was not an ambiguity or inconsistency internal to the document.

Comment: I think that is unfair. What if Sung Jun went right after the LC was issued and said that it was too late? The bank had the documents anyway – it had the proof that it made the mistake, not the seller!

Beyene v. Irving trust Co (2nd Cir 1985). Unless the name of the intended beneficiary is unmistakably clear despite an obvious typographical error, any difference int eh name constitutes noncompliance.Voest-Alpine Trading USA Corp.v Bank of America (5th Cir 2002). Different placement of USA in name did not justify dishonor. Looking at the documents and the transaction as a whole. Issuing bank was required to pay as it waived right not to pay by not contacting beneficiary and address the discrepancy issue in 7 banking days as required by UCP.Dixon Irmaos & CIA v. Chase National Bank (2nd Cir 1944). Bank should be aware of well-known and standard practices of other banks. B submitted a letter of guaranty from a NY bank to Chase in place of BoL which was being mailed. Bank refused to issue saying that it was a nonconformity. Ct said that custom under consideration explains the meaning of the technical phrase and is incorporated by implication into the terms of LC. Purpose of this custom is to allow the expeditious handling of business. Unless an indemnity can be substituted, quick clearance of these transactions don’t happen, lose purpose of transactions.Banco Esponol de Credito v. State Street Bank and Trust Co. (1st 1967). Strict compliance doesn’t mean slavish compliance. Go figure this out.

Independence Principle

- Use of bank reduces risk than if it were a sale of goods for money. If you put these together, it reintroduces risk that you had tried to get rid of in the first place.

- If no Ind Principle, how would banks participate in IBTs? Without the Independence Principle banks would still participate, however, they would be forced to undertake their own investigations (read: hire someone else) to ensure that the goods complied with the LOC.

o In light of independence principle, what happens when applicant decides not to pay after issuing bank has paid? This is after the documents have been submitted, documents have been received. If app doesn’t pay, bank has title to the goods – because it has the documents. It can then sell, get the proceeds.

o Bank could sue the applicant for fraud if the applicant behaves in a fraudulent manner. Or sue on breach of contract – but it has something already – the goods. It can sell the documents.

o Strict compliance: conformance of the documents – discharges its duty when it ensures the documents conform. Strict compliance is triggered by conforming documents and banks obligation is to pay against delivery of conforming documents. no discrepancies allowed UCP Art 13 – on their face, to be in compliance.

Banks must: examine documents with reasonable care to make sure they conform act upon any discrepancies found within a reasonable time, not to exceed 7 business days.

UCP – is not governing law unless incorporated into the LC. Both banks have to agree to incorporate UCP Org in swizterland sets standards for banks (BASIL).

Problem 4-9

- May Bank contact Applicant even if it found no discrepancy? No, it should not do that – 14(b) – supposed to find the discrepancy and 14(e) – if bank doesn’t act in accordance with the article, then it waives its right to claim that the documents are not in compliance with the terms and conditions of the credit.

- There is no discretion for bank to contact applicant and ask them to do its duty.- The scope of its duty is to examine the documents. It goes beyond the scope of its duties by

forwarding the documents and giving it to one of the parties. It is a major breach of good faith.

Fraud iii

UCP has no provisions on fraud, ie that it is silent on the issue Does it necessarily follow that courts in the US will apply UCC?

Not necessarily If you are a judge – you need to do a choice of law analysis if the contract

does not expressly choose law. You as the judge will have to gap fill. UCC applies because UCC is codified as state law. When it is codified as state

law.o Let’s say that one party is protesting the application of UCC and want UPC applied. What

are you going to say as the judge? That UCC will apply as the relevant state law is the governing law.

Fraud in UCC § 5-109- A holder in due course (HDC) one who takes commercial paper w/o prior knowledge of

fraud for good consideration. If the bank doesn’t detect it, it will accept it. If it does detect fraud, it must honor LoC even if it forged.

- Not all HDCs are included if HDC voluntarily chose to deal with Seller (wrongdoer)

If you buy the L/C from seller and you don’t know that there was fraud involved. You are not protected as a holder in due course if you buy it from the seller, the wrongdoerIf you buy it from another party – if brought into the transaction by some other party – such as the bank, the applicant – not in direct contact with the wrongdoer – then you are protected. - If banks were not protected, ie a bank that sells paper to another bank, never would have

transactions. Also, banks deal with paper, they aren’t involved in the underlying contract where the fraud actually exists. So banks are protected.

Bank may honor LoC even if the Bank has been notified by another party of fraud. So long as it acts in good faith, it will be ok. - How can it be good faith if bank honors even if been told of fraud?

buyer-applicant says that there is fraud there. Independence principle. The bank’s obligation is strict compliance – if it does that, then

it has discharged its duty. It’s not a breach of good faith to honor

- Role banks have in liquidity of negotiable instruments.- Bank honors: it is safe, it can still recover from buyer/applicant. If it doesn not honor –

bank will get sued and will have to prove fraud. 3) buyer has better remedy – have court issue an injunction against the bank. That way bank is safe.

- the policy reasons: o reluctance to be known as an unreliable bank in LoC transactions; o inability to evaluate the available evidence of fraud, especially on an ex parte

basis.- strategic reasons

o Bank can get reimbursed by Buyer if honor the LoCo If dishonor, Bank gets sued by Seller and may have to prove fraud as affirmative

defense. It’s not in a good place to do that.

Sztejn v. J. Henry Schroder Banking Co (NY Sup Ct 1941)Facts: P asked D to issue a L/C for beneficiary Transea Traders, Ltd. Seller submitted documents P found out that seller had not shipped the genuine merchandise before payment of LC was made. P brought suit against D to enjoin the payment. Issue: Whether the independence principle applies in cases of fraud.Holding: No, there is a fraud exception.R1: When the seller’s fraud has been called to bank’s attention before the drafts and documents have been presented for payment, the principle of the independence of the bank’s obligation under the letter of credit should not be extended to protect the unscrupulous seller.R2: When the issuing bank has already paid the draft before receiving notice of the seller’s fraud,

it will be protected if it exercised reasonable diligence before making such payment.R3: Even if the documents are correct, but in fact false or illegal, the bank cannot be called upon to recognize such a document as complying with the terms of a letter of credit. Rule policy: not to protect the unscrupulous party. Allows the bank to go behind the documents in instance of fraud so as to protect the innocent parties.Rationale: In this case, the bank had received notice of fraud before it accepted or paid the draft. The court makes a distinction between typical contract breach, such as warranty, and active fraud on the part of the seller. The typical breach is one that is behind the documents, not bank’s business. Here, the fraud is involved in the documents. Chartered Bank was not considered an innocent third party – such as a confirming or negotiating bank – merely a collections agent. Not holding in that sense.Comment: the fraud exception here is narrow – applies to cases before payment is made and no innocent third party involved. In this instant case – there was fraud in the transaction. The documents were used to perpetuate the fraud. And that the documents were forged.

Pre-litigation game

What if B goes to court and fails to get the injunction? What is B’s next likely move? If sue bank

o B-App must show that Bank did not discharge its duty in good faith This is very hard

If sue sellero Show fraud in the underlying transaction – which would be easier than showing

that bank did not discharge duty

Enjoining payment under the LoC

What must Buyer show to get an injunction?must show material fraudthat there is not alternative to an equitable remedy ie the injunctionEquity is justice.

Mid-America Tire, Inc v. PTZ Trading Ltd.

Facts: Corby and Evans wanted sell Michelin winter tires. They worked out deal that Sievers would purchase tires from Doumerc and then they would sell onward. Corby contacted

Chappell. Promised 50-70k winter tires. Said that his client handled overstock Michelin tires – in actuality not true. Chappell contacted Jenkins. Jenkins contacted Hine – they formed joint venture so as to purchase these tires. Chappell also asked for summer tires and were interested in making a package deal of summer and winter tires. Corby promised a lot – also told them that DA/2C designation only meant that DA defective appearance and 2C was location of tire. Many months of negotiation – went back and forth – tires of promised amount never materialized, found out that tires would banned in US (2C designation).In meantime, Hine got bank to issue letter of credit. Hine and Jenkins wanted the package deal and were frustrated with the prevarications of Corby. Both Corby and Evans were contacting Hine and Jenkins that they wanted the L/C before they would send out the summer tire list. Jenkins wrote back to say they were withdrawing the offer because the terms were unacceptable and not according to the negotiations. Jenkins and Chappell found out that Doumerc had the agreement with Michelin, not PTZ. They made arrangements to fly to france to work this out – and called Doumerc. Sievers answered the phone and said that he owned the winter tires and that he had the L/C and was shipping the tires. Mid-America aksed for an injunction to enjoin the L/C and trial court issued a temporary restraining order on March 16, 1999. Proc Hist: trial court issued temp injunction. Trial held on motion for a permanent injunction and it was granted pursuant to Ohio law. Court found that, although the documents on their face were in strict compliance with t and c of L/C, PTZ fraudently induced P to open L/C and ssuch fraud was sufficient to vitiate the L/C. Court of appeals reversed. Found that the UCP governed as it had been expressly incorporated into L/C. Found that UCP only stated independence principle, silent on fraud, therefore UCP necessarily precluded the enjoinment of L/C honor on basis of fraud in underlying transaction. Only fraud in the L/C transaction would preclude honor on the L/C. Party choice of law preempted any other law – doesn’t allow other law to speak, therefore cannot fill the gap.Def’s Arguments: that there is adequate legal remedy (suit after payment of L/C)P’s Argument: that the underlying transaction was fraudulently conducted, therefore vitiating the terms of the L/C. Issues: (1) Whether there is any fraud exception to the independence principle beyond the situation involving the beneficiary’s presentation of forged or fraudulent documents. (2) Does the UPC recognize an exception for fraud in the inducement of the underlying contract and supporting L/C?Holding: yesRule: When a letter of credit expressly incorporate the terms of the UCP, but the UCP does not contain any rule covering the issue in controversy, the UCP does not prevent relief and other law relevant to the controversy may govern.Vitiation exception: Material fraud is fraud that so vitiates the entire transaction that the legitimate purposes of the independence of the issuer’s obligation can no longer be served.Reasoning:- Response to D’s argument: the remedy at law is inadequate – would be not as prompt,

efficient and practical as an injunction.- The court finds that the scope of UCP is different than that of the UCC. UCP covers areas

that are not covered by UCC (ohio law incorporated relevant section of UCC). Each will govern in its area of coverage, and both will apply concurrently in the event of any overlapping consistent provisions. UCP’s silence on the issue of fraud should not be construed as preventing relief. Article 5 can fill gap.

- UCC incorporates rule of Sztejn. Applicant BoP: that the L/C was being sued by the beneficiary as a vehicle for fraud, or that the beneficiary’s conduct, if rewardedby payment would deprive the applicant of any benefit of the underlying contract and transform L/C into a means for perpetrating fraud.

- PTZ’s actions constitute material fraud – statements and facts were so misrepresented and that L/C was being used as a vehicle for fraud.

- Was the OH app ct’s decision compatible with Sztejn? No.- Was there clearly fraud evident in the contract?- The court found that an injunction was the appropriate remedy- Note: always raise objections – 1) jurisdiction, 2) choice of law, 3) remedy is not

appropriate. So that don’t reach the merits of the issue.

- Three major LoC holdings in Mid-America: UCP’s silence is not a preclusion That fraud in the documents and fraud in the underlying contract is reached by the UCC

– creates a real exception to the independence principle.

Technology TransfersSee outline- IP int’l treaties purpose: 1) to harmonize, 2) provide a procedure to allow IP owners benefit

and protection across intl boundaries and simplifies and facilitates the process sof obtaining IP rights within national legal systems.

- TRIPS: Agreement on Trade Related IP Rights. WTO members. Incorporates Paris and Berne Convention major provisions.

- Patent: inventions or processes that are novel ,useful, and nonobvious.- Patent law derived from useful arts and science clause of constitution.- Paris Convention: patent- Paris established right of national treatment and right of priority. - National treatment: = treatment w/ domestic IP owners- Right of priority: est. first rights to patent or trademark in the member countries.- WIPO: World IP Organization- PCT: Patent Cooperation Treaty – administered by WIPO. App who files a PCT application

has effect of filing in all member states – 117 parties. PCT does novelty search, but each country still has right to grant or withhold approval.

- EPC: European Patent Convention: regional patent registration. Once filed and approved, not necessary to file in all countries.

- EC Patent Convention: not yet passed. Will be a truly unitary European patent, will be one law – will supercede national law.

- Trademark: any word name, symbol, or device, or any combination thereof that is capable of distinguishing goods from those of another. Distinctiveness is a hallmark of a trademark, ie ability to act as an indicator of source.

- Lanham Act: domestic legislation, useful arts clause in Constitution.- These are appurtenant rights – must be assoc to a product and must be used in assoc w/

product.- Patent purpose: indicate source, marketing tool - expression of goodwill- TRIPS: right of priority and national treatment as for patent.- Madrid Protocol, 1996: est. int’l registration of trademarks – app filed and approved - =

rights in member countries. Good for 10 yrs, w/ perp renewals – [contingent upon use?]- TM Law Treaty, 1994: harmonize laws.- EC TM – regional TM system.- Copyright: an original work fixed in a tangible medium of expression. Basic right to prevent

unauthorized copying without permission. Fair use limits right of copyright holder.- Berne Convention: also national treatment and minimum standards of protection. TRIPS

incorporates Berne. Eliminated formalities as prereq for protection. Incorporates idea of moral rights – these are nonassignable rights.

- Universal Copyright Convention: UNESCO administered – not important anymore.- Know-how and trade secret: protected through contract and tort. Tort: unfair competition

and misappropriation of know-how. Some protect through secrecy, coca-cola formula.- 1996: Economic Espionage Act: fed crime for misappropriate of trade secrets for benefit of

foreign governments and others (does this follow that Wong Ho guy at Alamo?) - TRIPS recognizes trade secret

Handout #1 Counterfeiting and InfringmentG-77 – developing countriesInt’l Code of Conduct for transfer of technology. G77 want to be legally binding. 1stW want it to be guidelines.US Remedies: 1) seizure by Customs, 2) infringement actions, 3) criminal prosecutions under TM Counterfeiting Act, 1984), and Section 337 Proceedings.Anticounterfeiting Consumer Protection Act, 1996: trafficking in fake goods = RICO offence. Importers must disclose idnety of imported merchandise. Customs may no longer return goods

to source, must destroy.Copyright Felony Act, 1992: criminalizes CP infringementNo Electronic Theft Act, 1997: removed need to show financial gain as element of CP infringement, includes now personal use.Digital

Millennium Copyright Act, 1998: brings US into compliance with WIPO treaties, creates two new offenses: hacking and attempts to circumvent encryption.

Customs may seize, BoP on importer to demonstrate why to release, BoP on copyright holder to proved goods are pirated2nd Cir: Customs must employ the average purchaser test in whether important are counterfeits subject to seizure and forfeitureOmnibus Trade and Competitiveness Act of 1988 – revised § 337. Relates to imports. Don’t require US industry be efficiently and economically operated. Proof of injury to a domestic industry not required in IP infrmenent cases.Intl Trade Commission (ITC) – determines § 337 violation.Amgen v. US ITC, Fed Cir 1990 – patent owner had no claim to either the final product or process used to create product, even though foreign owner had used patent to create final product. § 337 - Can be used against gray market productsInfringement – can sue in domestic courts, but probl of reaching infrengers re jurisdiction and relief. Remedy: injunctions, damages, portion of profits. Can be destroyed on court order (lanham act)Trademrk Counterfeiting Act, 1984 – criminalizes counterfeting.Spotty int’l coveage on cuonterfeting. US uses carrot and stick method to enforce its IP holders rights in other countries, offering preferred nation status as carrot or give trade and other sanctions as stick.

IBT Continuum: Sales Licensing FDI

Sales: the most remote type of contactLicensing: it’s not a tangible good anymore, it’s intangible – use of IP property – you let go some of the control you have over the product. FDI: Foreign Direct investment – appropriation, takings, litigation that arises.

Who Owns IPRs

What are Intellectual Property Rights: rights over information, processes, sometimes tangible goods that incorporate technologies.

Who owns IPR? MNE, large corporations.

Plaintiffs Mid America Tire

Jenco Marketing inc Arthur Hine –

President and Signator of L/C

Fred Alvin Jenkins owner of Jenco

and Agent for Mid america

Paul Chappel – contractor for Tire Network

agent for Jenco

Defendants:PTZ Trading

SellerGary Corby – ind tire broker

Corby Intland PTZ agentJohn Evans –

owner Transcontinental Tyre CoPTZ’s admitted agent

Sievers – middle man dudeDoumerc and his warehouse

Actual Michelin tire overflow rep

Reasons to License

incentive to create They license because they want to profit from their rights. Collection of royalties –

expand the usage of their technology in other countries – develop reliance on their products.

Licensees seek licenses because they don’t want to pay the research costs, to acquire knowledge to technologies

The restrictions are anticompetitive in that it creates a monopoly, based on the incentive policy to create, to advance science and technology.

N-S Debate North wants exclusivity South – want technology to make technological leaps Was the WTO TRIPS Agreement a “victory” of the North

o Was a victory for N because it protects the rights of industrialized nations We had to pay a price to get it. The new industries are protected. The old industries are

not. Sell off old industries, ie steel industry. Then get services and distribution of goods and services easier in other countries.

Agriculture was protected in US Did we get what we bargained for in TRIPS? The most effected people are the ones in the North – you could make a lot of copies, now

you can’t. [but the corps get the benefits – not the south – and the corps are located in the north]

Intl IPR framework and a look at Brazil and China

division of labor between domestic legal stysems and international treatieso Domestic Laws

Creation of substantive IRPs and Creation of enforcement tools

o Intl Treaties WTO and TRIPS Minimum standards for protection of IPRs

Immediate adoption by all WTO members of Paris, Berne, Rome Conventions and Washington Treaty (semiconductors) – providing protection for patents, copyrights, trademarks, trade secrets, geographical indications and other forms of IP Art 2

Guarantees certain rights: Right of national treatment Right of priority/nondiscrimination

Signatory countries make Committmenet to enforcement via judicial process, ie remedies, enforcement, injunctions

Country Issues – Brazil Brazil gets a special break b/c is developing country US gives Brazil this priviledge Brazil has problem of enforcement however. See slide 7

China – PRC don’t recognize foreign trademarks records of these courts are not publicly available Chinese actions show progress, but not very certain of the impact Recent zippo lighter case – the fines for violation was only a couple thousand dollars. Polygram Records Corp v. Xu Hua Le 1995

o Misuse of master CDso Injunction, public apology, $1 million damages + court costs

Matsushita Susumi Inc v. Shanhai Jie Long Food Corporationo Misappropriation of cartoon figure

o Injunction, public apologies, damages = profits and costs Philip Morris Case

o Misappropriated Marlboro lighterso Damages based on price and cost of the lighters, not on losses of the TM holdero Upheld on appeal, insignificant damages = 70 k or so.

People’s Procuratorate v. o Criminal case of VW mufflerso Criminal conviction for primary defendant and fine

Long-Term efforts to stem IPR violation tideo Seminaris, tech assist, self-interest as motivationo Administrative fines fund enforcement agencies

Immediate actions:o WTO case – we have never done thiso TRIPS enforcement obgliation is general, so long as something is done by

member nation so as to permit effective action against any act of infringement of IPRs, would act as a deterrent to further infringments, then it is a remedy.

Domestic Remedies for foreign origin IPR violations

- Super 301 – said it would be a violation – said instead to use TRIPs- Intl Agreements do very little to protect US IPR. - Domestic remedies have been likened to chimeras, unachievable dreams-

U.S. Remedies Customs see first slide ITC § 337 Proceedings

o reach grey market goods, o unfair import practices before the ITC.

Grey market goods – goods not sold by the manufacturers – the channel they come into the US or any country is not one that satisfies the interests of the original manufacturer.

The problem with proceedings in rem if IIPR violation is claimedo Have to know where the goods are.

ITC has discretion whether to conduct investigation. ITC decisions have issue-preclusive effect. Once it fully adjudicates a case, its decision

can be raised as a bar from further litigation If successful, IP holder can get:

o General exclusion order: gets a code which designates it as prohibited. It excludes an order within an area.

o Cease and Desist order: order to a specific manufacturero Forfeiture order: you lose the product.o You can go to fed court to stop these things. You can also get an order to get the

goods inspected.o All these have advance notice problem.

Counterfeit goods: hard to track once admitted by Customs, there’s nothing you can do – they disappear into the market.

Handout #2 - § 337 complaintsSection 337 of the Tariff Act of 1930 allows complainants to file suit on unfair import methods or acts. Have duty of candor.- Duty of Candor is violated by 1) a failure to disclose material information or false material

ahs been submitted and 2) intent to mislead.- Commission starts an investigation, but is not obligated to investigate each complaint. If it

declines to pursue an investigation, it is dismissed. Dismissal is warranted when insufficient data or allegations do not prove a violation. Can refile or can appeal to Fed

Circuit.- Office of Unfair Imports (OUI) investigates.- If case is taken, respondents can submit briefs that respond to the complaint and raise

defenses. Failure to respond can result in admittance of the facts submitted by P.- In course of investigation, commission can provide temporary relief – prevent entry of

goods into US or allow entry under bond.- Temp. Remedy given if it looks like allegation is true and if there would be an immediate

and substantial injury to the domestic industry without a temporary remedy. Commission engages in balancing 1) likelihood P will succeed and 2) immediate and substantial harm to domestic injury vs. 1) harm to respondent and 2) effect of remedy on public interest.

Administrative Process- § 337 governed by Administrative procedure Act ∴ FRPC apply. - Commission aggressively enforces protective orders against disclosure of confidential and

business information of a proprietary character. - Commission can propose to settle by consent order or by agreement of the parties. An

arbitration agreement does not terminate ITC investigation. When commission reviews advisory decision of the judge, only has to decide case on basis of single dispositive issue. When decision appealed, only issue that Commission decided can be appealed.

- Sanctions: civil penalties of up to 100,000 USD or twice value of the good.Can also impose penalty for violation of consent orders.

- Settlements: have to give commission a copy of the complete settlement agreement and judge makes an initial decision as to whether to terminate the investigation based on the settlement. Commission makes final approval. Purpose – to preserve public interest in patent infringement dispute settlement. In non-patent cases, consent order for settlement. Parties must agree not to litigate, waive all rights to challenge consent order. This is not considered an admission of violation.

- ITC is not required to impose a remedy if it finds a violation. Public interest exception: when there is an effect upon public health and welfare, on US economy competitiveness, effect upon consumers.

General Exclusion and Cease and Desist Orders: 1. exclusion order – limited or general nature, IP cases. Keeps out infringing items. Also

may keep out noninfringing items if it is general. P must demonstrate a widespread pattern of unauthorized use of the invention and make reasonable inferences that foreign manufacturers other than the respondent may try to import infringing good. Proof may include: pending infringement suits, demand for good, a history of unauthorized use.

2. Cease and desist order: issued when there are significant amounts of product already imported into the US – stops further distribution. Can allow temporary entry upon bond – sometimes 600% of vaue of imorts

3. Forfeiture orders are uncommon, usually followed by notice of SecTreas that forfeiture would result from further importation of goods that offend § 337.

President can veto a Commission decision. Not reviewable by courts. POTUS has 60 days to amek a decision, then commission’s order becomes final. Order remains in effect until Commision decides there is no long reason to continue the order. Any violation can incur penalty of 10 k USD/dy or twice domestic value of good, whichever is greater.

ITC Opinion Letters: opinion letters on § 337 matters.

N-S Debate

Biopiracy: LDC claim to be owners of knowledge and biological resources and accuse MNEs and developed countries of theft. This turns patent on its head, it protects commonly shared knowledge and traditions of a community – turn it into private property to be financially exploited by only a few.

TRIPS does not address this, but 1992 Convention for Biological diversity – provides legal basis for recognizing ownership rights in traditional knowledge. Told TRIPS to examine based on this principle. TRIPS looking into it.

Traditional knowledge comes from local knowledge, tribal, cultural. The patenting research is culled from traditional knowledge.

Problem 7-8 Can Brazil pass such a law? Yes – it is a traditional state power. What if you’re PHizer – it developed a product based on traditional knowledge. Brazil says no, you’re not getting a patent. Not allowed to get a patent. Brazil – the natives sue in federal court – say that it was theirs first. This effectively lays claim to all common knowledge – removes the incentive reason for IP rights. The law doesn’t establish a limiting principle – doesn’t define guidelines. Also, it doesn’t seem fair that the Brazilian company – that didn’t do R&D, to benefit from the taking of this technology.

What is the international problem? Violation of the TRIPS agreement. PHizer can’t sue the government of Brazil. PHizer needs to convince the US government to file a complaint against Brazil at the WTO.

Laws that are not sovereign should not have extraterritorial effect – therefore law in Brazil does not apply in France.

For Brazil – could attempt to pass the law, then bring it to an international forum – but developed countries would be against it.

The problem with TRIPS – developed countries sign on to it.

In bio-piracy – hard to determine who is the bad moral actor. The developing country trying to protect its traditional knowledge, the corporations, the developed countries.

Rights are being negotiated by corporations – and sold away. Ie right to privacy – selling of personal information to third parties.

You can patent anything biological – so long as it’s not a human embryro.

Foreign Direct Investment

FDI – the most direct way to be involved in a countryInvestors from A will invest in country B – land, assets, etc. B may expropriate investor’s investment.

ICJ Expropriation Cases Lesson in issue avoidance Never reached the merits in these cases, so people b/g looking to other fora to litigate

these things.

ICJ Statutes Art 34(1) – only states may be parties in cases before the court

o ICJ has jurisdictions only over stateso Only certain parties may appear before the court, only stateso If you are a private company, you have to convince your country to bring your

case for you. If so, you no longer have control over the case, the governments may choose to settle, etc.

Hurdleso State must give consento Only a state has standing to sue

o Must exhaust domestic remediesICJ want to avoid reaching the issue:

o ICJ would have to decide to apply either the Hull or the Calvo doctrineo It would have to decide on the merits damages, and how damages should be

paid, o Calvo: Host has inherent right to expropriate + compensation need be prompt

and host determines the amount of compensation taking into account “equities of the situation” (LDCs and view)

o N-S debate creates friction BITs

o Bilateral treaties on investmentso Quid bonoo But no bilats on trade – would be binding on corporations.

ALI Law of Expropriationo Just compensation, but doesn’t define whether is Hull or Calvo Doctrine

Anglo-Iranian Case (1952 ICJ Rep 93)Facts: Anglo-Iranian had an oil concession in Iran, negotiated in 1933. in 1951, Iranian government nationalized oil industry. A-I invoked an arbitration clause, which Iran rejected. British government took up case. Declaration made by iran saying that it would accept the jurisdiction of the court on any disputes arising after the declaration on issues regarding situations or facts relating to the application of treaties or conventions accepted by Persia and subsequent to the ratification of the declaration. Britian wanted the benefit of two treaties made between Iran – Turkey and Iran Denmark to extend to the treaty it made with Iran prior to the declaration. Court said only treaties made after the declaration – and presumeably between the two parties. So the court didn’t have jurisdiction.

UK takes up case on behalf of BP. Issue: whether ICJ has jurisdiction

o Need to est jurisdiction 1) there are states in front of it 2) must be consent of both countries to ICJ juridcction.

Britian’s arguments: o Britian is argument the meaning of the term subsequent applies to facts or

situations, ie any fact or situation following the declaration applies. The nationalization of oil is a situation or fact following the declaration, therefore ICJ will have jurisdiction

o Iran’s argument: that it applies to only treaties or conventions. The Brits argument in the alternative was that the negotiated terms of Iran’s treaties with Turkey and Denmark applies to UK through the MFN provision in the treaty w/ UK and Iran. It was arguing that Iran had to give the benefits of the Denmark and Turkey treaties to UK through the MSN provision.

o Most Favored Nations: what you give to one country, you must give to me.o ICJ said no, subsequent refers to subsequent treaties – the UK’s treaty was not

subsequent – therefore will not reach the other treatieso By deciding there was no jurisdiction, ICJ basically destroyed the MFN principle

for UK.o Iran: said that subsequent applied to treaty – no subsequent treaty therefore no

consent

Barcelona Traction Case- essential distinction between the obligations of a State towards the international

community as a whole, concern of all States. In view of the importance of the rights involved, all States can be held to have a legal interest in their protection; they are obligations erga omnes.

- The right of diplomatic protection is different, state must first est. the right to do so. Here, the right of Belgium have not been violated when shareholders have suffered harm as

shareholders of a company not of Belgian nationality.- Rights of shareholders and FDI only come treaty stipulations or special agreements.

Source of the taking is a company. Court decides the taking. Three Spanish shareholders asked for bankruptcy proceedings Why didn’t Canada do anything?

o It didn’t have an agreement with Spain that would confer consent.o Belgium however, did have an agreement with Spain

Belgium’s argument: that it was an aggrieved party because of the injury its shareholders suffered.

However, Belgium did not have the right to exercise diplomatic protection, including standing in the World Court, on behalf of mere shareholders.

ICJ says no. No derivative actions. There is no right under international law for a shareholder to sue a corporation.

When shareholders do not have a cognizable right to sue on behalf of their corporations – they lack standing

ICJ says there is causation, and injury in fact – but there is no redressability ∵ shareholders didn’t have the right to sue the corporation at that time.

Elsi Case- Raytheon bought an Italian electronic equipment company in Palermo. Elsi was never

viable, Raytheon decided to shut it down. Palermo Mayro requisitioned the plant stating grave public necessity.

- Ultra vires is a Latin phrase that literally means "beyond the power." Its inverse is called intra vires, meaning "within the power

- Hull formula – no government can expropriate private property w/o adequate compensation.

- Reiterated in Chozow Factory Case- Calvo Doctrine – the opposite of the Hull formula – advocated by LDC and socialists.

Compensation must neither be prompt, prior, and the government can determine the amount taking account of the equities of the situation.

- Restatement 3 foreign relations law of us – hull + , a taking is one taken not for public purpose, is dsicm, not accompanied by just compensation - = to value, w/in reasonable amount of time, and in a form economically usable.

Whether Raytheon had exhausted the domestic remedies. ICJ said shareholders do not have a right to sue based on Barcelona Italy argued that what had happened was creeping expropriation, not a taking in the

sense that the US and the treaty meant. Italy argued that the US had not proven its case that this was an actual taking. US did

not show that what was taken was of value. Therefore, if can’t prove expropriation, then there is no case of expropriation before it,

therefore, no consent.

ICSID Arbitration & Procedural Issues: International Center for Settlement of Investment Disputes

Need:Standing: must be a countryConsent to be thereA live disputeOver investmentHome country of investor and host state must be parties to ICSID Convention

Lanco Intl v. Argentine Republic what were Argentina’s two broad objections to ICSID jurisdiction?

o Argentina argues that forum selection clause in the concession agreement deprives ICSID of

jurisdiction Says that the BIT doesn’t apply because this is not an investment And that the term “previously agreed” in the BIT means that it only applies to

agreements before the BIT. The board decides that previously agreed means before the dispute Treaties are supposed to be prospective – to decide things from this point on Argentina also argued that a previously agreement dispute-settlement procedure,

then the parties agreed to submit only to the jurisdiction of the federal contentious-administrative tribunals of B.A.. deprives ICSID jurisdiction

Tribunal says that it can’t be previously agreed choice of forum b/c there is no choice. By making forum selection impossible, by choosing a court that cannot be selected or waived electively, then this cannot be understood as a dispute-settlement procedure.

o That a shareholder, as Lanco is, has no standing to bring an arbitration action That they didn’t make an investment within the meaning of the BIT That there wasn’t an investment dispute within the meaning of the BIT And that the concession agreement does not foreign investment.

o Consent Did they consent to this? Yes - BIT

o Personal and SMJ Yes – signatories of the ICSID Convention SMJ – arose from investment dispute, and the dispute is legal in nature.

o First slide – 2nd bullet It’s a kind of estoppel argument – you signed the document, you agreed to

jurisdiction. Tribunal got Lanco out of the agreement by saying there was no choice in the choice of forum, so there was no real choice of forum.

Standing issue – that comes from Barcelona Traction case – Tribunal says that having shares is investment.

Consent – is this a live dispute? Normally – you cannot sue the sovereign unless they waive their right and consent

to jurisdiction. Lanco is suing a sovereign nation – therefore must require consent.o Colorable arguments are nonfrivolous arguments

Do jurisdiction Do consent Excluded from the terms and conditions of the thing - estoppel Then litigate the merits – this is absolutely last.

o In this case and for ICSID Convention – to est. jurisdiction Legal dispute – live Home country of investor and host state must be parties to ICSID Convention:

Between a contracting state or any part thereof, and a national of another contracting state (this is a diversity requirement like in our system – it isn’t exactly like diversity – but it is somewhat like it)

Consent to Arbitrate - Who consents in writing to submit to the Centre’s ruleo ICSID is very competent

Wena Hotels v. Arab Republic of Egypt Wena claims that Egypt had incited a riot to drive out foreign management of the hotel – the private

company owned by tourism board. Was there diversity in this case? There was a UK corporaton and the Egyptian government The eqyptian shareholder didn’t destroy diversity – the Egyptian company – owned by foreign

nationals majority – shall be treated as a company of the other contracting party. This is to get around incorporation laws that require incorporation domestically. This is to get around destruction of diversity.

The eyptian argument was good – if not considered a domestic corp, then look, it’s run by a local – it’s not really a foreign company.

ICSID doesn’t require 100% diversity – it is considered a UK company if it has some foreign control over the investment

Why did Egypt make a claim there was no legal dispute?o That it was a private company that attacked Wena – had nothing to do with Egypt.o Tribunal said that it was

On the meritsEgypt violated fair and equitable treatment and expriopriation of the stuff

Nafta Investment Chapter and Arbitration is a more sophisticated national bit national treatment of foreign investors of Mexico, US, Canada

o national treatment – to treat each MFN treatment to foreign party investors

o Treatment of all foreigners the same

Martin Feldman v. Mexico (2003) Could Fedlman take Mexico to court himself? No, b/c he’s not a sovereign. BITS or the NAFTA thing

allows individuals to sue These were grey market goods – they are distributed in a manner not controlled by the

manufacturer.o The manufacturer wants to control

What were Feldman’s claims?o That they were being discriminated againsto No national treatment

WTO/TRIMS Agreement

Proscribed Conduct in International Business: Bribery

FCPA contains broad jurisdictional nexus

o nationality principle – reaches acts of US personso And traditional or territorial jurisdiction: extends jurisdiction over anyone (includes anyone

on US territory) or to acts performed by US parties who use an instrumentality of the US interstate or foreign commerce, regardless of presence in the US

Some exceptions to FCPAo The grease money: so long as targeted government action is routine, not linked to

influencing foreign official’s decision to grant or maintain government business Ie clearing customs faster, So long as it is a clerical decision Its expedition of business – that is allowed

o Affirmative Defenses: Lawful payment under the written laws and regulations of the foreign officials’

country Reasonable bona fide expenditures – made in connection with interaction with

foreign official, if directly related to demonstration of products or services or execution or performance of K with foreign government.

BoP is on Defendant – you need proof of the law, or to prove it’s a custom or tradition.

2 sets of obligations:

antibribery – prohibit issuers, domestic concerns, and any person from making use of interstate commerce corruptly in furtherance of an offer or payment of anything of value to a foreign official, foreign political party, or candidate for political office for the purpose of influencing any act of that foreign official in violation of the duty of that official or to secure any improper advantage in order to obtain or retain business.

o Issuers – any US or foreign corp registered with SECo Domestic concerns – individual who is a cit, national, or resident of US, corporation

organized under US law, or has PoB in US.o Nexus with interstate commerceo Corrupt intent – scienter requirement (full knowledge or knowingly) – evil motive intent or

purposeo Payments – acts to further payments is included.o Payment to foreign officials – not private personso Purpose of payment is to obtain retain or direct business to any person. Does not have to

be with a foreign government. Books and records provision applies only to entites qualifited as isuesrs under SE Act of 1934 and

requires issuers to keep accurate records that do not disguise improper payments as something innocuous.

OECD Convention – broader than FCPA originally ∵ also included the securing of improper advantage as a motive.

UN Convention against Corruption proscribes commercial bribery, trading in influence, and “laundering” of the proceeds of corruption this includes private not just officials. Therefore the reach is broader Now in force (Dec 2005) & US is signatory Provides for mechanism to recover bribery-related funds and assets Focuses on “undue advantage” rather than payments (ie broader)

CLAIM PRECLUSIONiv

US v. King (8th 2003)Facts: FBI were investigating Owl Securities and Investments and individuals involved in a deal to develop a port in Costa Rica. Investigation concerned payment to Costa Rican officials and political parties to obtain concessions for the land on which the port would be developed. The project had many components, FBI investigated the CEO, CFO, a VP, an agent of OSI in its Cost Rican office, and King, who was one of OSI’s largest investors. FBI obtained the cooperation of the CEO and VP to get recordings of conversations between alleged conspirators, including King. The recordings were used to indict him. CEO and VP entered plea agreement and received more lenient sentencing.Proc. Hist: grand jury indicted King for conspiring to violate FCPA and Travel Act by agreeing to bribe Costa Rican Officials to obtain land concessions for a project. Jury later convicted him under the FCPA and conspiracy. He appealed claiming that the evidence was insufficient to support a conviction and that the trial court erred in denying King’s motion to dismiss due to government’s overreaching conduct.Holding: The court held there was ample evidence in the record to support the convictions and that the government’s conduct was not sufficiently overreaching or outrageous.Issue 1: Whether the evidence was sufficient Rule: To prove conspiracy, government BoP to show there was an agreement between at least two people who had the objective to violate the law. Proof of a formal agreement is unnecessary. A tacit understanding is sufficient and can be proved by direct or circumstantial evidence.Rule 2: FCPA prohibits the use of any means or instrumentality of intestate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of payment of money, or an offer, gift, promise to vie or authorization of the giving of anything of value to a foreign official for the purposes of influencing any act or decision of such foreign official in his official capacity.Rationale: The court looked at the evidence and determined there was enough circumstantial evidence of an agreement between 2 or more parties with the intent to violate the law. The law here is 15 USC § 78dd-1(a)(1)(A) – use of an means or instrumentality of interstate commerce [here is letter of credit or an escrow account – unclear which was used] to further a payment to a foreign official to influence his official activity [here is obtain the official’s signoff on the concession]. The taped conversations show that King had knowledge of the payment and that he knowingly participated in offering the bribe.Issue 2: whether the government’s actions could be considered overreaching and outrageous.Rule: the actions must be conscience-shocking behavior to be considered overreaching and outrageous, and therefore inadmissible. Such actions may consist of actions that induce contrived evidence or involve

trickery.Rationale: the use of “unsavory informants” is not such behavior that rises to the level of outrageousness needed to support a due process violation. The claim that D made was a substantive due process claim.

U.S. v. Kay (5th 2004)Facts: American Rice, inc exported rice to Haiti. It wholly owns a subsidiary, Rice Corporation of Haiti, which is incorporated in Haiti and deals with third parties there. Haiti applies custom duties and require remittance of an advance deposit against Haitian sales taxes based on the value of that rice. They get it back when sales tax returns are filed. Defendants were charged with 12 count of FCPA violations, including orchestrating the bribing of Haitian customs officials to accept false bills of lading and other documentation that understated the quantity of rice shipped to Haiti, which reduced customs duties and sales tax. This involved false documentation, calculation of bribes as a percentage of the value not reported, monthly payment to Haitian officials Proc. Hist: District court granted D’s motion to dismiss the superseding indictment for failure to state an offense against them. D alleged that the business nexus element, to assist in obtaining or retaining business, narrowly limited activity to those intended to obtain approval for a bid of a new government contract or renewal of an existing government contract.Issue: Whether the defendant’s conduct in connection with alleged bribery of Haitian officials to understate duties and taxes on rice to assist the American Rice, Inc was conduct sufficient to constitute an offense under the FCPA. BoP is beyond a reasonable doubt.Holding: Court determined that conduct or activities conducted for the purpose of avoiding duties and sales taxes could be within the scope of the FCPA, but is not necessarily always within the scope. Must establish a sufficient nexus with to obtain or retain business element.Rule: FCPA criminalizes the payment to foreign officials that are intended to 1) influence a foreign official to act or make a decision in his official capacity or 2) induce such an official to perform or refrain from performance some act in violation of official duty, or 3) secure some wrongful advantage to the payor with the intent to assist, or intended to assist, the payor in efforts to obtain or retain business. There has to a sufficient connection between the payment and the business nexus element in order for an action to be reached by the FCPA.Exception: grease money or facilitating payments were excluded. Distinction between corrupt and non-corrupt grease money is that prohibited payments induce officials to act corruptly, misuse official position and discretionary authority, grease money payments are toward those actions that are ministerial in nature and intended to move a particular matter toward an eventual act or decision which does not involve discretionary action.Affirmative defense: that the payments were legal in that country or constitute bona fide expenditures related to promotion of products or services, or to the execution or performance of a contract with a foreign government or agency.Rationale: The court looks at legislative history of the FCPA to determine whether Congress considered bribery of officials to reduce duties and taxes as an activity that it wanted to reach with the FCPA. FCPA legislation was passed in 1977 in response to widespread practice of US business interest to bribe foreign officials to obtain benefits. Congress considered it both morally and economically suspect and that it caused foreign policy problems. Also was counter to American morals and values, embarrassed our allies, was ammunition for our enemies, lowered the esteem of the U.S. Saw that Congress was more concerned with making distinction between prohibited activity, which would affect the above, and grease money payments. Court then looked at types of bribery: looked to Senate proposal and also SEC report. Even though Senate was particularly concerned with bribery intended to secure new business, it was also mindful of bribes that influence legislative or regulatory actions and those that maintain established business opportunities. The overall concern of Congress was to clamp down on bribes intended to prompt foreign officials to misuse their discretionary authority for the benefit of a domestic entity’s business in that country.

1988 Amendment allowed for an affirmative defense: that the payments were legal in that country or constitute bona fide expenditures related to promotion of products or services, or to the execution or performance of a contract with a foreign government or agency. Shows that Congress considered carefully what exceptions it wanted to allow.

1998 Amendment: to place it in conformity with OECD Convention on bribery. It incorporated improper

advantage into the list of abuses of discretion, therefore making a payment to such a foreign official to secure an improper advantage to obtain or retain business as an offense. Here, ARI got something it wasn’t entitled to, a tax break, through bribery of officials.

In sum, Congress intended to reach a broader category of activity that the Defendant alleges the FCPA is limited to.

It is incumbent upon the fact finder to find that the bribe was made with the intent to obtain or retain business.Issue 2: whether there are minimally sufficient facts alleged in the indictment to prove the nexus between the bribery for reduction of duties and taxes and obtaining or retaining business in the host country.

Holding: still have to figure that out. Insufficient facts to show this. Remand.

Foundation of the Shareholder’s Committee Rep. Former Shareholders of Saybold Intl, v. Schrieber (2nd 2003)

Facts: Saybolt International is a Dutch LLC. It owns Saybolt NA, its wholly owned subsidiary. Mead was CEO of NA and the head of all operations of Saybolt in the western hemisphere. Saybolt de Panama SA, a subsidiary under the control of Mead, wanted to acquire property in Panama for construction of a lab and office complex. Property was identified, but a lease could be acquired only if they paid a bribe to a Panamian government official. Mead raised the issue in a NA board meeting and Schreiber, a lawyer present at the meeting and an officer within NA, said that NA could not pay the bribe because it would break the law. However, he allegedly led Mead and others to believe that the bribe payment could be made by the Dutch affiliate, Saybolt Intl. Based on this advice, an employee traveled to Panama to arrange the bribe. Payment came from Intl and wired directly to S.A. the NA employee directed SA employee to deliver the bribe.

US officials were investigating environmental crimes of NA and executed a search warrant. Found evidence of the bribe. Core Laboratories purchased Saybolt Intl and its controlling interest in NA. Pursuant to the purchase agreement, Intl shareholders placed 6 mil in escrow to cover any criminal liability that might arise from the activities in Panama. Core also assigned to the former shareholders the right to sue for any legal malpractice related to the Panama incident.

US prosecutors brought separate actions against NA and its officers. Mead was indicted for violating the FCPA. The corporation conceded to the charges for committing a corrupt act, a bribe-like transaction in the international commerce of US, that it was not a mistake and that the officers knew what they were doing. Mead decided to fight the charges. He contended that Schreiber led him to believe the bribe payment could legally be made. He was convicted after the jury was instructed to determine if the evidence showed the defendant actually believed the transaction was legal.

The plaintiff is is an assignee of Saybolt’s former shareholders’s right to sue based on legal malpractice. Proc. Hist: P alleged that Schriber committed legal malpractice by failing to advise Saybolt NA that the bribe payment as proposed to be paid by Dutch company to Panamanian officials would violate the FCPA. But for his advice, the bribe payment would not have been made, even at the cost of the entire Panama deal. He also breached fiduciary duty and contract to provide competent professional services. The injury alleged is the amount paid in criminal fines. D moved for summary judgment based on p was collaterally estopped by two previous decisions that charged corporation and Mead. Saybolt pleaded guilty and therefore cannot now contend that Schreiber’s action caused the damages incurred by Saybolt. Because Saybolt pleaded guilt and admitted it acted with knowledge that its conduct was unlawful or corrupt, it can’t sue Schreiber as the cause of its injury.Issue: whether P is collaterally estopped by Saybolt’s criminal plea from arguing in this case. Holding:Rule: FCPA 78dd-1, 78dd2 prohibit:1) issuers, domestic concerns, and any person 2) from making use of interstate commerce 3) corruptly 40 in furtherance of an offer or payment of anything of value 5) to a foreign official, foreign political party or candidate 6) for the purpose of influencing any act of that foreign official in violation of the duty of that official or to secure any improper advantage in order to obtain or retain business.

It is not an element of the crime to be aware that it is violating a crime under the FCPA.Corruptly is defined in the Senate report as connoting an evil purpose or motive, an intent to wrongfully influence the recipient. A fundamental component of a corrupt act is a breach of some official duty owed to the government or to the public at large. There is nothing in the word that indicates government must establish D in fact knew that conduct violated the FCPA to be guilty of such a violation. Specific intent to violate the FCPA is not an element of FCPA violation.Rationale: that, even though NA admittedly did commit an act knowingly, it did not know it was committing a violation of the FCPA at the time. It did not know it was committing such a violation because Schreiber negligently told it was not committing a violation by causing a foreign entity to pay the bribe. Knowledge that it was violating the law is not within the meaning of the statute, nor is it an element of the crime. Collateral estoppel applies to only those issues actually decided in the previous proceeding. The court defines the question as whether NA acted with knowledge that its conduct violated the FCPA and this was not answered in its guilty plea.

Mead’s conviction did not estopp P from relitigating the issue of malpractice against Schrieber because the question regarded Mead, not Saybolt Intl. The district court had concluded that Mead had known the transactions were illegal. In order for P to be barred by collateral estoppel, Mead would have to be in privity with Saybolt Intl at the time of Mead’s trial. Found no such privity b/c Mead was fired before trial and did not exercise any control over his defense.

Anticompetitive Behavior and an Introduction to Extraterritoriality:

Extraterritorial judicial jurisdiction: involving parties not in the jurisdiction and will suffer from decision abroad.

Procedural incidents; not involve the jurisdiction of the court.

Violations of anti – trust informal agreements of trade organizations the effect must be see slide 6. It is the eq of Sherman anti trust act. 81 is triggered when 250 million dollars in Europe – any merger or ac will trigger notification of

commission. MS – bundling software – it hurt the competitive position of Netscape – it triggered jurisdiction and

tha thte repeated bundling lead to losses in Europe to the major competitor and to losses in innovation

Helms burton – sanctions on cuba – prhoibites us companies from trading with cuba. Anti boycott loaw – a boycott of the state of isreal or some other thing we want protected. If a trade

partner or one of the companies participate with another countries boycott (such as Saudi Arabia), they get in trouble with this law.

EU allies have reacted? See it as encroachment of sovereignty.o So enacted blocking statutes

EU Blocking StatutesEnd of Comity?

clawback provision good faith attempt to work around blockade – business is put in a bad situation. Comity: vwe enforce other country’s judgments.

Prohibited ActivitiesProhibited behaviorsA business with a monopoly over certain products or services may be in violation of antitrust laws if it has abused its dominant position or market power. Although not all anti-competitive behavior which is subject to antitrust laws involve illegal cartels or trusts, the following types of activity are generally prohibited.

Bid rigging - A form of price fixing and market allocation, and involves an agreement in which one party of a group of bidders will be designated to win the bid

Predatory pricing - The practice of a firm selling a product at very low price with the intent

of driving competitors out of the market, or create a barrier to entry into the market for potential new competitors

Price fixing - An agreement between business competitors selling the same product or service regarding its pricing

Tying - The practice of making the sale of one good conditional on the purchase of a second distinctive good

Vendor lock-in - Is a situation in which a customer is so dependent on a vendor for products and services that he or she cannot move to another vendor without substantial switching costs, real and/or perceived

Geographic allocation - An agreement between competitors to not compete within each other's geographic territories.

Walker Process fraud - Illegal monopolization through the maintenance and enforcement of a patent obtained via fraud on the Patent Office (the term comes from the Supreme Court case Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965)).

Antitrust laws, or competition laws, are laws which prohibit anti-competitive behavior and unfair business practices. The laws make illegal certain practices deemed to hurt businesses or consumers or both, or generally to violate standards of ethical behavior. Government agencies known as competition regulators regulate antitrust laws, and may also be responsible for regulating related laws dealing with consumer protection.The term "antitrust" derives from the U.S. law which was originally formulated to combat "business trusts", now more commonly known as cartels. Other countries use the term "competition law". Many countries including most of the Western world have antitrust laws of some form. For example the European Union has its own competition law.Overview from EU websiteCompetition is a basic mechanism of the market economy and encourages companies to provide consumers products that consumers want. It encourages innovation, and pushes down prices. In order to be effective, competition needs suppliers who are independent of each other, each subject to the competitive pressure exerted by the others.The antitrust area covers two prohibition rules set out in the EC Treaty.

First, agreements between two or more firms which restrict competition are prohibited by Article 81 of the Treaty, subject to some limited exceptions. This provision covers a wide variety of behaviours. The most obvious example of illegal conduct infringing Article 81 is a cartel between competitors (which may involve price-fixing or market sharing); For more information on cartels see the cartels section.

Second, firms in a dominant position may not abuse that position (Article 82 of the EC Treaty). This is for example the case for predatory pricing aiming at eliminating competitors from the market.

The Commission is empowered by the Treaty to apply these prohibition rules and enjoys a number of investigative powers to that end (e.g. inspection in business and non business premises, written requests for information, etc). It may also impose fines on undertakings who violate EU antitrust rules. Since 1 May 2004, all national competition authorities are also empowered to apply fully the provisions of the Treaty in order to ensure that competition is not distorted or restricted. National courts may also apply these prohibitions so as to protect the individual rights conferred to citizens by the Treaty.International Arbitration & Litigation

M/S Bremen v. Zapata (USC 1972) (choice of Forum Case)Facts: Zapata (Z) hired Unterweser (UT) to tow Chaparral (CP), a drilling rig, from LA to Italy. Contract stated that they would litigate any dispute in English courts. Bremen started to tow, big storm, Cp was damaged, towed to FL. Zapata commenced suit in FL – DC Tampa - for breach and negligence, UW moved to dismiss ∵ of forum selection clause and for FNC. UW commenced suit in London for breach against Z, who moved for dismissal which was denied. DC denied motion to dismiss or to stay initial action using rule from Carbon Black.Issue: Whether the forum clause was enforceable.Holding: It is.Rule: Old traditional rule has changed. Original rule under Carbon Black – that such clauses are not enforceable because of object of such a clause is to oust jurisdiction of courts and therefore contrary to

public policy.

Normal forum non conveniens doctrine in the absence of a clause: unless the balance is strongly in favor of the defendant, the P’s choice of forum should rarely be disturbed.

However, in cases of international transactions, Carbon Black does not apply. Policy behind this is that it does not encourage commerce if we govern all contracts by US laws and make parties resolve them in US courts. Old doctrine is provincial.

rule for intl contracts and cases in admiralty: if there is a forum selection clause, such clauses are prima facia valid and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstances. Some indications that it is presumptively fair: when the contract is freely negotiated, gives effect to the legitimate expectations of the parties, is a vital part of the agreement, the parties are competent.

When the clause should be set aside: strong showing of fraud, would be unjust, overreaching, clause is produced by overweening bargaining power.

Reasoning: The court reversed and upheld the clause. Did not find that the contract was unjust/unfair. Times are changing, have to change the rule too.

Dissent said that the decision affected the substantive rights of one of our citizens. Applying English law would exculpate UW.

McDonnell Douglas v. Iran (8th 1985): a forum selection clause was held unenforceable because there were compelling and countervailing reasons: litigation in the courts of Iran would have been so difficult that the corporation would have been deprived of its day in court as no dip. relations, Iran/Iraq war, and travel to Iran difficult. In addition, the forum clause used the preferential word "should" as opposed to mandatory language such as "shall" or "must."

Paper Express v. Pfankuch (7th Cir 1992): enforced clause even though the clause was in fine print and in German. The court said that basic theory of contract: person who signs contract is bound by the terms. To do so w/o knowledge of what one is signing is doing it at one’s peril.

Carnival Cruise: 1991 USC upheld clause printed on the back of a boat ticket.

Vimar v. Sky Reefer: 1992 – USC upheld clause on a bill of lading.

Amco Ukrservice v. American Meter (Pt. II) 2004Facts: see Pt 1. Choice of forum not selected.Issue: Whether to apply PA law or Ukrainian law Holding:Rule: PA choice of law rule: hybrid of significant relationships and interest analysis.

Significant contacts: needs of interstate and international systems, relevant policies of the forum, policies of the interested nations, expectations of the parties, basic policies of the SM, certainty, predictability, and uniformity of the result, ease of applying the law.

Interest analysis: 1) true conflict: court will apply the law of the forum with the greatest interest in the dispute, 2) apparent conflict: court may be able to resolve it by interpretation, 3) false conflict: only one state has an actual, legitimate interest

Reasoning: Court held that PA had a great interest in resolving the conflict that would advance PA’s public policies – promote commerce, fosters stable business environment. There were significant contacts. Ukrainian policies in resolving the dispute were inapplicable. The Regulations on Supply of Industrial Goods – meant for governing contracts internal market within Soviet bloc. Provisions on Form of Foreign Economic Agreements – also inapplicable ∵ not meant to regulate joint venture agreements. The 2 signature rule – not predicable or certain the result, the rule applied not uniform. Based on this, saw this

as a false conflict ∵ only PA had an actual, legitimate interest in resolving the conflict. PA law governs.

Restatement of Conflicts § 187.

Problem 8-4The relevant question is whether risk of loss is controlled by mandatory law – the law agreed to in the agreement. French law says that Ohio shall bear it. Whether French law applies as the law chosen by the parties will depend on whether the issue is controlled by mandatory law. Choice of law clause will apply if mandatory law does not.

Mandatory law: a matter of public law. Party cannot freely dispose of mandatory law in civil law countries.

Is risk of loss controlled by mandatory law? Public law that cannot be waived by the parties. No. Risk of loss is not. Therefore French law will apply.

8-5

Whether the 60% per annum interest rate be against mandatory law in the US. We have mandatory law on interest rates – and is not an issue that either party may dispose of or waive to. Then have to do an analysis of choice of law: ohio or French law – pick Ohio law ∵ injury to P who is Ohio, in Ohio, reached out to him in Ohio.

Problem:

French company now opens a subsidiary in Z. Would you apply Z law? Would the answer change? No, ∵ it still violates the mandatory law of the forum, Ohio.

Problem 8-3

2nd Cir decided that the general rule is when general jurisdiction is not made exclusive, it does not prohibit adjudication in other courts. Here, the language says that all disputes shall come within the jurisdiction of the Italian courts. To solve this problem, would have had ot put in “exclusive” jurisdiction of the Italian court.ARBITRATION

New York Convention on foreign arbitral awards. The relevant national law that gives arbitration its binding character is the Federal Arbitration Act of 1994 – 9 USC § § 1-307

Strong federal policy to support arbitration. Forum/choice of law clause in agreement between parties is an almost indispensable precondition

for the orderliness and predictability essential to any international business transaction. Scherk v. Alberto-Culver (US 1974) It also included security isseus – mandatory law. Policy reason: to foster business by providing orderliness and predictability in contract.

Antitrust laws may be arbitrated as agreed by the parties. No presumptive exclusion. Mitsubishi case.

COGSA dispute goes to arbitration so long as liability is not lessened. Sky Reefer Case. They can choose the means of enforcing that liability is subject to party agreement so long as liability is not lessened.

US courts have adopted a strong non-parochial, comity-based & pro-arbitration policyo UK are strong arbitration, but not as strong as ourso Arbitration clause upheld even when arbitration panels are to decide on matters controlled

by mandatory law.

Mitsubishi Motors Corp v. Soler Chrysler Plymouth Inc (USC 1985)

Facts: D entered into a distributor agreement to sell P’s car. Agreement contained arbitration clause – arbitration in Japan. P filed suit in federal court of PR to compel arbitration. D counterclaimed that action’s of P were in violation of Sherman Anti-Trust law by stopping D from selling cars on mainland US through the agreement. The court below said that this was not arbitrable ∵ it was a public law, does not

fall within scope of arbitration. Issue: whether P could compel arbitration for a claim that involved public law since the arbitration clause governed the matters falling under the contract.Holding: YesRule 1: Threshold: If the parties agreed to arbitrate that dispute and barring evidence of fraud, overwhelming one-sided economic power or other legal constraints that would provide grounds to set aside the contract, the conflict will be arbitrated. Public policy favors arbitration ∵ of its usefulness in international trade. Issue 2: whether, even if they agreed to arbitrate, if they could arbitrate public law. Holding: YesRule 2: So long as the prospective litigant may vindicate its statutory cause of action in the arbitral forum, the statue will continue to serve both its remedial and deterrent function. The tribunal is bound to arbitrate a claim, if it has its basis in a public law, in accordance with that public law. There is no presumption against arbitration of statutory claims. There may be some bars to arbitration, such as potential complexity of the problem, lack of competent and impartial arbitrators, and lack of American Safety doctrine importance of private damages remedy. Reasoning: To issue 1, found that There is a strong favorability to arbitration. Moses H Cone Memorial Hospital. they had made an agreement to arbitrate and barring legal constraints external to the agreement, it would be upheld. Those things that are legal constraints: fraud, overweening bargaining power, contract of adhesion.To issue 2: the court found that the litigant could vindicate its cause of action through arbitration. The court found there was no warrant in the Arbitration Act for a presumption against arbitration of statutory claims. The P said that the antitrust claims were nonarbitrable because 1) governmental enforcement through treble damages is important, 2) contracts that generate anti-trust disputes may be contracts of adhesion and militates against using part of the contract (the automatic forum clause) to enforce the contract, and 3) antitrust issues are complicated and ill-adapted to the strengths of the arbitral process. In response to 2) have to find that contract is barred through fraud, etc, to 1) the importance of private damages does not compel conclusion must be litigated in court. To 3) arbitrators aren’t incompetent, no reason to believe that justice will not be done. I think essentially the court saw that the tribunal would not abuse its position; it’s a well established institution, would do the job and not arrive at an unfair result. Therefore arbitration ok.

The court said that it would not allow arbitration if it would be unreasonable and unjust. It did not find that here.

Problem is that the arbitration may not apply the law correctly. The USC says that the US courts will have a “second look” approach and doublecheck the work of the arbitrators. Howeve,r there is no guarantee that the arbitration award will be enforced in the US.

There are 5 grounds to refuse enforcement of an award:1. incapacity of one of the parties or the agreement to arbitrate is not valid under the law2. if the party was not given proper notice3. the award deals with a difference not contemplated or falls within the terms of the arbitration

agreement4. the arbitration took place was not accordance with the agreement5. the award has not yet become binding on the parties or has been set aside by a competent

authority of the country in which that award was made. Meaning there is a law or a public policy that will let them set aside the award.

This is the problem: they can change the decision of the arbitration if the award is sought in the US – this Is an assumption that creates loopholes.

In this situation: Mitsubishi will plead res judicata and dismissal. Solar will have to plead that the arbitration process was fraught with fraud and the arbitration decision should be put aside due to fraud or some other legal constraint.

Polytek Engineering Co v. Jacobson Co. (MN 1997)

Facts: P contracted with D to buy rubber recycling equipment and then would sell it to a company called Hebei (H) in China. P and D did not form contract ∵ P was waiting on finalizing contract with H, but they negotiated, etc and D issued a standby letter of credit. P and H agreement contained arbitration provision. P sent a PO to D that contained a Remarks section saying that it would conform to t and C of main contract, the Hebei agreement. H didn’t like equip, H and P arbitrated, H won. P then sought arbitration against D, who never showed up or acknowledged the proceedings. P won – 1 mil. Now in US court to seek confirmation of the award.

Issue: Whether the agreement to arbitrate in the underlying contract bound D.Holding: YesRule: to decide whether to confirm an award must have:

1) an agreement in writing to arbitrate the subject of the dispute2) arbitration in the territory of a signatory of the Convention3) agreement must arise out of a legal relationship whether contractual or not, which is commercial

in nature4) One of the parties cannot be an amcit, or the commercial relationship must have some reasonable

relation with one or more foreign statesReasoning: slam dunk on 2-4. Real question whether there was a writing. Court said yes ∵ D’s conduct deemed acceptance of the terms and conditions of the underlying hebei contract. IE waiting until hebei contract was complete, saying that waiting for PO w/ “official contract” attached. Etc. Since the Hebei contract contained an arbitration clause, therefore the clause applies. The court recognized the arbitration award and enforced it.

You must find answers to all four above, if one fails, no arbitration.

The reason for having a writing is the FAA – the implementing statute of the convention.

Glencore Grain v. Shivnath Rai Harnarain (9th 2002)

Facts: P bought rice from D. made 11 contracts, 300k of rice. Agreements contained arbitration agreement = to be done in London by Long Rice Brokers Association. UK law governed. P was awarded, but never got award. Filed in Indian court, still pending. Then P filed in US court. D moved to dismiss – lack of specific or general jurisdiction. Issue: Whether a US court could enforce an arbitration award when there is absence of personal jurisdiction over the party.Holding: NoRule: Arbitration does not and the Convention does not abrogate due process requirement of jurisdiction of the courts must exist over the defendant’s person or property.Reasoning: courts still must have jurisdiction over the party. Even though the FAA provides that an action under the convention shall be deemed to arise under the laws and treaties of the US and that district courts shall have original jurisdiction – ie that court has SMJ. Threshold is still jurisdiction. Court of appeals affirmed the dismissal for lack of persona l jurisdiction over the defendant.

This case is about what minimum requirements are needed to 1) bring a suit or to 2) enforce an award. 1- SMJ and then PJ.

The court found that there was SMJ – that it covered the member states, but that it lacked jurisdiction over the D ∵ due process – must have jurisdiction over the party for due process.To make determination whether there is PJ:

national aggregated contacts 14th amendment minimum contacts – must be state contacts Unreasonableness

The question was process achieved over shivnath? Process was effected by state process, so must analysis under 14th amendment prong. If by federal process, go to 5th amendment prong.

In the Mitsubishi case – it was a federal question: ie antitrust – arbitration law is controlled by FAA – federal law.

In this case, Mitsubishi brought an action against Solar – because court had personal jurisdiction over Solar – not a long arm statute – not a state action – it is basically looking at a federal claim and whether that court had jurisdiction – there was ∵ there was presence in the forum. There was service and

Venue: go look this up.

Jurisdiction

Ask yourself threshold question: jurisdiction, forum and venue.

Jurisdiction to prescribe: contains legislative jurisdictiono Jurisdiction to prescribe, to form normso Comes from legislation

The other type, judicial jurisdiction: SM.o Territorialo Subject matter jurisdiction

Territorialo Conduct within a territory of a nationo Status of persons or interests located within territory

Extraterritorialityo Nationality principle: extraterritorial conduct of nationalso Protective principle: extraterritorial conduct of any party that is directed against state

secrecy or certain other interests. Ie if you do something that threatens US national interests. That is the type of conduct the protective principle encompasses. There is also a rule of reason – a state may not exercise prescriptive jurisdiction when the exercise would be unreasonable.

Effects Doctrine: exterritorial conduct by any party that has 1) actual and substantial effect within the territoriy or 2) is intended to have a substantial effect within the territory

The effects doctrine –

Judicial Jurisdiction: Territorial Jurisdiction TJ demarcates the reach of adjudicatory power of courts over civil cases within a sovergieng’s

territory so long as such exercise of authority would not be unfair or unreasonable. Courts determine GJ in a diversity case:

o State minimum contacts + unreasonableness test Essentially Intl Shoe and WW VW and Asahi

What law governs TJ in a federal question case?o It depends if process was served pursuant to state statute. If the basis of your suit fed

question, the question of whether the court should exercise territorial jurisdiction, will depend on the 14th amendment due process clause analysis.

o State Process: 14th amendment analysisIf process served by 5th amendment – then you look at contacts in a different way

You look to the nationally aggregated contacts – you look where court is. You have to ask if the long arm statute applies and if it is constitutional.The federal service of process – has to be gauged by 5th amendment test

Views the territory as having no states, just one big stateYou look at the national aggregate of contacts over the whole of that one stateAnd then you look at the unreasonableness test.

Unreasonableness Test: whether the exercise of jurisdiction offends traditional notions of fair play.

1. relatedness of claim to contact. Claim asserted arises from contacts2. systematic and continuous activity in the state3. convenience to D – must put at severe disadvantage4. forum state’s interest – state had legit interest in redressing grievances of residents5. P’s interest in obtaining convenient and effective relief6. interstate judicial system’s interest in obtaining the most efficient resolution

7. shared interest of the states in furthering fundamental policies

Asahi Metal Industry v. Superior Court US 1987Facts: Asahi was sued for indemnification from Taiwanese company who was sued for product liability of a defective tire which caused accident. It had no contacts within the forum state, CA. Lower court found that CA court had jurisdiction because Asahi’s tire valve, when placed into the stream of commerce, was done with awareness that it would reach the forum state.Issue: Whether the mere awareness on the part of a foreign defendant that the product it made would reachthe form state in the stream of commerce constituted minimum contacts such that jurisdiction could be exercisedHolding: No, mere awareness is not sufficient to create jurisdiction.Rule: In order for a court to have jurisdiction over a foreign defendant, which did not have any connection to the forum state other than the product:1. the defendant must have purposefully established minimum contacts in the forum state. 2. The contacts must proximately result from actions by the defendant himself (minimum contacts) that create a substantial connection with the forum state. 3. A defendant must purposefully avail itself of the privilege of conducting activities within the forum state. A consumer’s unilateral action of bringing the defendant’s product into the forum state was not a sufficient constitutional basis for personal jurisdiction over the defendant. 4. Foreseeability that the product may end up in the forum state is insufficient to establish jurisdiction. Reasoning for this: due process forbid a state court to exercise personal jurisdiction over a foreign defendant that would offend traditional notions of fair play and substantial justice.Reasoning: Asahi did not reach out to the forum state with the purpose to avail itself of the benefits and priviledges of doing business in CA. Its product was sold to a Taiwanese firm, who then sold it to a retailer in CA. The court also found that CA had no particular interest in a case between a Japanese corporation and Taiwanese company over an indemnification claim.

Territorial jurisdiction includes PJ, IRJ and QIRJA federal court may have supplemental jurisdiction – these guys don’t have diversity they are both foreigners.

State court is a court of general jurisdiction. Still has to wrry about exercise of jurisdiction may be constitutional. So it went ot supreme court. The lower court said that it had jurisdiction because mere awareness that product may end up in forum was sufficient to give jurisdiction.

14th amendment test: minimum contacts. This is the power prong.

Contrary to what you read in the case – there was 5-4 on power. That there was jurisdiction. However, only 4 justices

Sovereign Immunity

Sovereign is immune from jurisdiction unless an exception to immunity found in FSIA, 1604 , 1605 – 07

1604: Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter. Exceptions:1605: 1) waiver of immunity2) action is based upon a commercial activity carried on in the United States by the foreign state3) any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state1606: the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances; but a foreign state except for an agency or instrumentality thereof shall not be liable for punitive damages1607: In any action brought by a foreign state, or in which a foreign state intervenes, in a court of the United States or of a State, the foreign state shall not be accorded immunity with respect to any counterclaim, (a) for which a foreign state would not be entitled to immunity under section

1605 of this chapter had such claim been brought in a separate action against the foreign state; or (b) arising out of the transaction or occurrence that is the subject matter of the claim of the foreign state; or (c) to the extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the foreign state.

The Act of State DoctrineAct of State is a separate defense. Handout 4It’s a doctrine of abstention: judicially created doctrine of deference to acts of a foreign sovereign where the exercise of jurisdiction would otherwise be proper.The forum has subject-matter jurisdiction it just chooses not to exercise jurisdiction over a particular claim The doctrine rests upon considerations of international comity, separation of powers, and intended to avoid embarrassment or to injure foreign relations.Sometimes courts will receive advise from state dept if it would injure relations. Silence does not mean that it would be injurious to foreign policy.

Optopics Labs v. Savannah Bank of Nigeria (SDNY 1993)Facts: P is an assignee of Ashford Labs (A). D issued a letter of credit on behalf of Mabson Pharma, who had bought cold tablets from A. A fulfilled the documentary requirements. Confirming bank, Bank America Intl, told him that LoC issued and ready when documents were. He went to go get it, but D was unable to remit to Bank America USD because of lack of foreign currency. Confirming bank could issue payment, but would not get reimbursed until foreign exchange cover made. A was then told to go to Chase Manhattan Bank to submit a claim form, which A did not do. D asserts that since A did not go to Chase, conditions of LoC were not strictly complied with and that Bank not required to honor LoC.D also argues that Nigerian exchange controls are governmental policy and any act by court would be interference with a sovereign act of state.Issue: Whether the bank would be immune from liability due to its immunity as a sovereign state.Holding: No, it is not.The act of state in optopics was the Nigerian exchange controls = the Nigerian central bank refused to issue American dollars to pay for the letter of credit. Rule: Act of state doctrine is that a US court will not adjudicate matters laws of nations as applied within their own borders are soverign and should not be passed upon by our courts and 2) judiciary should be restrained from rendering decisions that affect US foreign policy, a sphere of power assigned to exec and legislative. It requires a court refrain from adjudicating the legality of a sovereign act of a foreign state. The threshold is that the act must take effect entirely within the boundaries of a sovereign nation. When it is outside sov territory, courts must decide whether to give extraterritorial effect to the foreign law, based on comity, only if it does not conflict with the laws and policies of the US. This rule is to be applied thinking about foreign policy implications and applied flexibly on a case by case basis.R2: In cases of debts that banks owned by sovereigns owe to our nationals, applicability of doctrine depends on the situs of the debt, where the right to receive repayment from banks in accordance with the loan agreements. If it is to take place in the sov country, act of state doctrine prohibits adjudication. If it takes place in US, courts must consider whether to apply the doctrine if it is consistent with laws and policies of the US.Reasoning: The court finds that act of state doctrine is inapplicable. Situs of debt in US, not going to give extraterritorial effect to law because in conflict with US law and policy. Found that A had fulfilled documentary requirements and was entitled to receive payment. For P.

Analysis:1: define the act of state2: identify where the act occurs: within or without the territory of the country3: when to apply the doctrine: when it is within the territory of the nation or if it occurs outside the extraterritorial effect – if it idoes not conflict w/ US law.

Braka v. Bancomber (2nd Cir 1985) – the entire act was perfected within the territory of Mexico. The

situs of the debt was located in Mexico. The purchase was made in Mexico, and that the principal and interest would be paid in Mexico from a Mexican bank. This is a case for situs within territory.

Allied Bank v. Banco Credito Agricola (2nd Cir 1985): said that the situs of the debt not entirely within Costa Rica. The court said that Costa Rica’s interest in this was limited to the extendt it could unilaterally alter the payment terms. Said that this was not sufficient reason to locate debt entirely in Costa Rica and apply the state act doctrine. Therefore, would have to question whether or not to give extraterritorial effect to Costa Rican law. They said no. Second part of the analsysi

Garcia v. Chase Manhatten Bank (2nd Cir): doctrine was inapplicable ∵ the situs of debt was wherever it could be collected.

Sov immunity: exception is commercial activity, which gives courts SMJ.

If the Nigerian government’s action were not against US public policy, then court would abstain from exercising SMJ out of comity.

Why did the US court not apply comity? ∵ it modified contract terms of LoC. Governments shouldn’t do that.

M. Nov. 20 VIII.E. (cont'd): Txtbk, pp. 725-29 (do problem 8.12); Folsom, Gordon & Spanogle

Be aware of procedural issues interface with substantive issues: these will come together. Be aware of SMJ, notice, jurisidiction, foreign sov immunity defense, act of state defense.

Fogade v. ENB Revocable Trust (11th 2001)Facts: Act of state doctrine was raised by Defendants. Under Sabbatino, judicial branch may not examine the validity of a taking of property within its own territory by a foreign soverseign government, even if taking violates international law. Congress passed Hickenlooper apmendment which changes this doctrine.Issue: how the act of state doctrine and Sabbatino, as modified by the 2nd Hickenlooper Amendment applies here.Holding: Act of state doctrine will apply. The Hickenlooper Amendment does not preclude the application of the doctrine because it does not meet the requirements.Rule: Hickenlooper Amendment’s allows judicial review in the following circumstance (3 requirements): 1) claim of title or other right to property, 2) based on or traced through a confiscation or other taking 3) in violation of international law. A confiscation usually involves misappropriation by foreign govts of property that belongs to cits not of that country. When a country takes property entirely owned by its own nationals, it does not violate international law.Reasoning: The court said that even if it viewed the taking as a legitimate confiscation, it would not be in violation of international law because it was a taking of its own national’s property. Therefore the application of the doctrine is not precluded.

The circumstance where amendment applies: federal court must not decline on act of state grounds to address the merits in a case when a party asserts a claim of right based upon a confiscation or other taking by an act of state in violation of the principles of international law. The taking must be based upon and derivative of an act of state that is in violation of international law.

The defendants want to extend the act of taking as one long continuous process to the US, such that an extraterritorial taking had occurred. This is not what happened.

Class of 11/20/06

See slide 4 for the facts of the case P are Fogade and Corpofin. The Defendant’s brought the money into Miami

The court also noted that the Ps made the act extraterritorial ∵ they brought it to Miami The sovereign act was to put the banks into receivership. Act of state can be used as a sword if the P is the government.

Sabbantino case: Cuban government took propertyAct of state is a defense. But it cannot be used when it violates international law. The government took ownership of Corpofin when it put it into receivership – there is a claim of title to property. This title is linked to ownership of the shares of corpofin. The defendants said that the shares were procured through illegal means. That this was against int’l law ∵ the confiscation was a taking w/o due compensation.

Sabbatino no longer controls. Amdnement now is controlling. But it didn’t apply here.

Hickenlooper: see handout 4. sometimes courts don’t want to apply SMJ. Also there is sep of power. They will only apply amendment if they find a violation of intl law.

Handout #4, pp. 705-12;

Act of State limitations:W.S. Kirkpatrick v. Environmental Tectonics Corp.SCt refused to apply the act of state doctrine because it did not involve an inquiry into the lawfulness of an act of a foreign sovereign, but merely to consider the motivations of foreign officials.

Int'l Comity & Forum Non Conveniens (FNC):

DeYoung v. Beddome (SDNY 1989)Facts: Dome was being acquired by Amoco Canada, Canadian subsidiary of Amoco – IN corp.Issue: Whether a US court could decide a case already decided in Canada and where forum non conveniens and international comity are at issue.Holding: granted the motion to dismiss on grounds of international comityRule: Doctrine of international comity (Hilton v. Guyot):

Federal courts are to recognize the laws and judicial acts of another nation with due regard to both international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws. Essential for the foreign decision not to offend laws or public policy of the forum jurisdiction or violate the rights of its citizens. Federal courts may look at a case where federally protected rights may not be protected by a foreign court. It is not pertinent if the law is merely less advantageous to the plaintiff. Comity issues are not the same as issue preclusion.

FNC Analysis:1. is there an available alternate forum:? YOU MUST DO THIS.2. If Yes, balancing among

a. Private interestsi. where the litigants are located, ii.where the witnesses and evidence locatediii. private interests of the litigants

1. P’s choice of forum weighs less heavily in a representative case or derivative case: only a small direct interest in a large controversy that may have many potential plaintiffs in many potential jurisdictions (like class actions).

2. Ps in such a case only own an interest in the controversy and desire to represent others similarly situated.

b. Public interestsi. public interest of having adjudication where the critical events took placeii.burdens on the foreign court system (SDNY courts are over burdened)iii. what choice of law would apply – would have been Canadian law anyway. iv. local interest - localized controversies decided at homev.interest in having the trial in a forum that is at home (familiar) with the law that

must govern the action,

vi. avoiding unnecessary problems in conflict of laws or in the application of foreign laws,

vii. interest in not burdening citizens in an unrelated forum with jury duty. c. If No available alternative forum, court will decide to adjudicated. If they are foreigners, an alternative, adequate forum? That is all you look at.

3. Courts give weight to P’s choice of forum so long as basic things are met, notice, forum, venue, etc.

4. Foreign Ps do not get a lot of deference. Piper case. The courts don’t apply the same decision making in case of foreign plaintiffs. Ie so must ask if they are foreign or domestic plaintiffs.

Reasoning: this is such a case. Ps are Canadian, the docs etc are in Canada. The only document location outside of Canada is Chicago, and that is not certain. The Dom’es transfer agent, Bank of NY, role in the matter is utterly insignificant in evaluating the totality of the lawsuit and where it should proceed. The court finds that where the plaintiff’s substantive contribution to litigation is nil, and evidence to be found in the proposed jurisdiction is nil, and discovery would be cumbersome, it is not convenient forum. Based on NY choice of law (Klaxon), Canadian law governs the heart of the complaint, which means that the law is foreign to federal jurisdiction.

Class of 11/20/06

P sued in a second forum ∵ it knew it was about to lose. By filing a second suit before your second loss – you’re trying to prevent res judicata from being used against you. If you are D – you ask for a stay or a dismissal.

Court said that it could have decided the case on both grounds when the motion to dismiss were filed. After Canada made a decision – the court couldn’t say FNC, it won’t be sent to any trial.

Opinion structured on FNC argument, but used comity as the reason to dismiss.

Comity – based on Hilton v. Guyot. international comity is more than recognition and enforcement. No comity is owed when a foreign government action or foreign court decision contradict US foreign policy.If it doesn’t contradict US public policy, then courts may decline to exercise of jurisdiction for comity reasons.

Hypo: if action in Canada is still pending, and if the Ps are foreign. FNC will work. Do balancing act after saying foreign defendants get less weight tot their choice of forum. You could also dismiss based on comity – doesn’t matter that it hasn’t yet been decided in Canada. However, once decision made in Canada – court could dismiss on comity (like this case). Court can only dismiss when the defendants raise res judicata as a defense.

W. Nov. 22 VIII.F. JURISDICTION (cont'd): Txtbk, pp. 812-14; Skim 814-20; FNC CaseIn re Union Carbide Corp. Gas Plant Disaster at Bhopal (2nd Cir 1987)

- Litigation in SDNY- P is the Indian government representing the victims of the Bhopal tragedy- D is UCC – Union Carbid Corporation- UCC made a motion to dismiss - The Indian government brought suit in the US because UCC located here. The Indian government

sued here ∵ Indian courts didn’t have jurisdiction over UCC.- SDNY dismissed ∵ of FNC.

Used Piper ruleNo deference to Foreign DefendantsSaid that P not residents, whether there was an adequate alternate forum, look at private and public interests

Private Interests all discovery in India, accident occurred in India

all Indian nationals, next to no Americans in India who worked at the plant the UCC agreed to be amenable to the foreign forum

Public Interests Court doesn’t make much of a public interest argument That justice would be carried out, the Bhopal Act, gave government the

capacity to act as warden of the victims The concern of the Indian government – public interest in resolving the issue,

so the foreign court would take care of this.It is not a relevant factor whether the foreign law is less favorable. Piper: disinclined to examine US vs. foreign law and both systems advantages and disadvantages. A change in law, even if it would be unfavorable, is not a relevant factor.o However, consider alternative adequate remedy: how bad does the foreign legal system

have to get before it does not consider it an adequate alternative.o In piper, said in order for Scottish P to sue in US for an accident that occurred somewhere

else, it would open the doors to litigation. In US – strict liability – no need to show fault. In Scotland, would have to. If piper turned out differently, P would be foreign, D would be corporate. It would allow foreign P to avail themselves of our stricter laws, and would get better discovery. Should not handicap corporate defendants by allowing this litigation

o UOI’s 22% ownership stake in UCIL a problem for either court? Union of India (UOI) Court got around this by appointing an executive panel – appointed members who

took away some control from UOI. Court of Appeals: it deleted two of the conditions and upheld the decision to dismiss on FNC

Due process condition: said that it was ambiguous and might appear that the “minimal” requirement might indicate it is a lesser due process standard.

In cases where there is a transfer between forums (for convenience), then you apply F1 law. You just transferred the location

Deleted discovery standard under US standardsUCIL and UCC – only the US defendant opened to US discovery. So it would apply unequal discovery standards to both defendants. Must be equal treatment.The only way to get the Indian defendant – would have to get their consent to US discovery process.

o Effect of Dismissal on FNC Grounds:It does not deprive an American court of jurisdiction to hear the dismissed cases in the future.

If UCC didn’t comply with the order, the US court can apply sanctions.If the court dismissed the case on condition, or for FNC, the court If D doesn’t comply w/ conditions of the dismissal – P can snitch and court can impose sanctions, rehear the case, make it bad for D.

Foreign Judgments in American courtsCase is litigated and there is a foreign judgment.Will come to US courts to enforce the judgementWhat law applies to enforce? Notions of comity allow the judgement to have force within US territory.The court will apply a full faith and credit analysis whether to enforce judgment

(SMJ) Whether jurisdiction existed by foreign court over prior caseDue Process: did the proceedings comply with substantive and procedural due process

Substantive: territorial jurisdictionProcedural: notice and opportunity to be heard

Is the judgment contrary to local public policyWhether rendering court’s legal systems affords US judgments reciprocal treatment

Jurisdiction over Parent and Affiliated Companies:

Factors Supporting US Courts obtaining jurisdiction over a Foreign Parent Companya high level of control and involvement in the US subsidiary’s daily operationsthey share common officers and other key personnelsubsidiary is marketing conduct through which a significant portion of parent’s sales in US occurparent uses the subsidiary to perform activities that it would normally perform itself.Public and marketing materials do not show a distinction between parent and subsidiaryFailure to observe corporate and legal formalities of the distinction between parent and subsidiarycommon and related involvement of the challenged conduct.

Itel Containers v. Atlanttrafik Express Service Ltd. (2nd 1990)Facts: Sea Containers Ltd (SCL) bought a shipping line and its two carriers. Because it did not want to openly compete with customers, it formed a corporation, AES Ltd, which served as the holding company of the AES liner service. AES Inc was formed as a wholly owned subsidiary of AES Ltd to operate the liner service. SCL acted as a loaner – it loaned money to Ltd to purchase the line and to finance the operations. Ltd formed a contract with Itel, FlexiVan and Textainer (P) whereby P would lease equipment to the AES line. P attempted to get guarantees on the leases from SCL, which refused. The P entered into leases directly with Ltd. Ltd went into liquidation and bankruptcy and P brought suit against SCL in SDNY to recover payment for the leases. That court ruled that SCL had no liability for the debts of Ltd.P Argument: Raised 3 arguments in the alternative, SCL should be liable because 1) it was a joint venturer with Ltd (joint venture liability), 2) it was the Ltd’s principal (agent theory), or 3) abuse of the corporate form warranted piercing the corporate veil (that the subsidiary is the alter ego of the parent company and need to reach parent by piercing the veil).Issue: Whether SCL should be liable under one of the 3 arguments, 1) is a joint partner, 2) subsidiary was an agent, therefore holding the parent company liable, or 3) the abuse of the corporate form justifies piercing the corporation veil.Holding: No, it was not liable.Rule1: A joint venture is a partnership for a limited purpose and the legal consequences of a joint venture are equivalent to those of a partnership. One partner will be liable for the other’s actions.To form a joint venture there must be 5 elements. All elements must be present before joint venture liability may be imposed. 1) two or more person must enter into a specific agreement to carry one an enterprise for profit, 2) agreement must evidence intent to be joint venturers, 3) each must make a contribution to the joint venture in property, financings, skill, knowledge or effort, 4) each must have some degree of joint control over the venture, and 5) there must be a provision for the sharing of both profits and losses. Must have both to be liableReasoning: The court finds that SCL did not intend to engage in a joint venture because it used layers of corporations so that its involvement with AES would be remote (element 2). SCL did not intend to share in losse, only profits (Element 5).Rule2: Two theories on agency:Express agency: created through written or spoken words or other conduct of the principal which, reasonably interpreted, causes agent to believe that the principal desires him to act on the principal’s account (act in the principals’ shoes). An express agency is formed based on the actual interaction between principal and agent, not as perceived by any third party.Implied agency: depends on the reasonable conclusion of a third party, derived from the actions of the principal, that the agent has the authority to do so from the principal. It is the conduct of the principal that must be interpreted and must cause third party to believe principal consents to agent acting on his behalf.Any third party dealing with an agent does so at own peril, and must make the necessary effort to discover the actual scope of authority. BoP on third party. Reasoning: THer eis no evidence of an express agency – clear from start SCL was limiting liability and furthering itself from the AES ltd. There is no evidence of an implied agency, the principal’s conduct shows that it was not authorizing agent’s actions.Rule3: To justify piercing the corporate veil, there must be abuse of the corporate form, specifically 1) the principal’s use of an agent was to perpetrate a fraud on the plaintiffs or2) agent is used as an alter ego through domination and disregard of the corporate form. Mere use of the corporate form to avoid liability is insufficient to warrant piercing the veil.

Reasoning: the court found that piercing the corporate veil would be unjustified because SCL was not trying to perpetrate a fraud on plaintiffs. P not able to show any evidence of fraud. It also was not warranted because SCL was not using Ltd as an alter ego. It respected the corporate form and Ltd was its own entity and conducted business as such.

Jurisdiction over Foreign Parent & Affiliated Companies

Whether US courts will enforce foreign judgments:- is not the same as arbitration, no law to make courts enforce judgments- whether jurisdiction exists under foreign law- It will depend if US due process, both substantive and procedural, is satisfied- If there is fraud that would make the judgment invalid- If the rendering court’s legal systems reciprocate and honor US judgments- There is no constitutaionl requirement. Just based on the notion that we want to encourage other

country’s to honor ours.- Would a US court disregard a French judgment for which personal jurisdiction was based solely on the

P’s French domicile.o An alien, even not resident in France may be summoned b/f frnech court for fulfillment of

obligations. French Civil Codeo Ie if an American, for an injury that occurred in Thailand, enforce a French default judgment

against American? No Jurisdiction, yes. But no substantive due process

To avoid liability- observe the corporate form, allow subsidiary act as its own corporation- avoid creating an express relationship- to avoid creating an implied relationship, avoid all conduct that gives perception that subsidiary is just

using subsidiary as an agent.

Jurisdiction vs. Liability

in the parent/affiliate context, factors for jurisdiction and liabilityJurisdiction: is more lenient, the threshold for liability is higher.Jurisdiction is easier to prove. Liability is harder, jurisdiction is a threshold issue.The threshold is different.

Is it possible to assert jurisdiction over a foreign parent that strictly observes corporate formalities on the basis of the subsidiary contacts with the forum?

Yes – alternative forms of liabilityAgencyJoint venture

Itel – can assert jurisdiction over the foreign parent, but did not find liability. There was enough to assert jurisdiction but not enough to assert liability

Holding Corporations Liable for Torts Committed Abroad–A. The U.S. Alien Tort Statute Txtbk, pp. 822-40; Note: When reading Doe v. Unocal, pay extra attention to the analysis in "II.A.1-2," pp. 836-38

28 USC § 1350The 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 or a treaty of the United StatesSosa v. Alvarez-Machain, 542 US 692 (2004) USC court decision on the Alien Tort StatuteThe USC said that it was a jurisdictional statute only. That is what the USC holds. (opens the doors to courts)It does not provide a cause of action, only jurisdiction

ATS: 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.- is the ATS a jurisdictional and remedial statute? - The ATS does not create a cause of action, it only creates jurisdiction.- Ex: civil rights states to sue state authorities on a cause of action. That is a cause of action statute- Violations of law of nations during 18th Century Paradigm

Violations of safe conduct (passports – pass through a sov terriroty w/o molestation)Infringement of ambassador rightsPiracy

- Present definition of : tort committed in violation of the law of nationsPiracy – now includes hijackingTorture – filartiga – now internationally recognized as a binding international lawKadic – Genocide and extrajudicial killingsGenocide, crimes against Doe v. Islamic Salvation Front – easily cognizable international crimes. They are federal law by virtue of supreme law.SlaveryBinding international law = law of nations

- ATS does not limit who can be sued. – D does not have to be an Americanimmunities to ATS

o The President, vice president, - Sosa Case:

o The Causes of action go beyond Congress. It is the law of nationso Not only based on federally created statute, based on the law of nationso Court held there was jurisdiction but not cause of action.o Arbitrary arrest ≠ a cause of action cognizable under law of nationso USC said it wouldn’t be creating new causes of action. No more federal common law. Erie.

Beanal v. Free Port-McMoran Inc (1999)Facts: P sued D (mining co), alleging violations of international law. Plaintiff alleged environmental abuses, human rights violations, and cultural genocide in the operation of the mine in Indonesia, claiming jurisdiction under Alien Tort Statute (ATS) and the Torture Victim Protection Act (TVPA) of 1991. The district court dismissed the case, and plaintiff appealed. The claims were devoid of names, dates, locations, and other facts to put defendant on notice as to the nature of the claims. The court held that plaintiff failed to state a claim under the TVPA. Plaintiff's allegations were predicated on the same claims of individual human rights violations as under the ATS. Plaintiff failed to provide sufficient facts to support the claims.Issue: whether Freeport violated the Alien Tort StatuteHolding: Not enough facts to allege the claimRule: § 1350 confers subject matter jurisdiction when the following conditions are met: (1) an alien sues (2) for a tort, (3) that was committed in violation of the law of nations or a treaty of the United States.Notice Requirement FRCP 8 require more than bare bone allegations that a wrong has occurred.A law of nations: is a wrong generally recognized as an international law violationATS only applies to shockingly egregious violations of universally recognized principles of international law.Reasoning: P’s allegations were bare bones, did not allege enough fact to give notice to the defendant. Therefore his claims fail. Also, his environmental tort claims not a cuase of action under laws of nation. Cultural genocide not a cuase of action. TVPA provides an explicit cause of action for toturre and extrajudicial killings. ATS provides jurisdiction.

Aguinda v. Texaco (2nd 2002)Facts: P, residents of Ecuador and Peru, sued defendant, a United States oil company, alleging that the company's operations in the residents' countries resulted in environmental and personal injuries. In consolidated appeals, the residents appealed the judgment of the United States District Court for the

Southern District of New York which dismissed the actions based on forum non conveniens. P contended that Ecuador was not an adequate alternative forum since a new law precluded the residents from proceeding with the action in Ecuador after filing suit in the United States, and since the Ecuadorian courts were unreceptive to tort claims, did not recognize class actions, and were inefficient and corrupt. The residents also argued that the balance of interests did not warrant a forum non conveniens dismissal. Issue: whether the case was properly dismissed on FNC.Holding: Yes, it didRule: FNC considerations: 1) plaintiffs are foreigners, 2) is there Adequate alternative forum test, 3) balancing of private and public interest factors.Reasoning: The court held that Ecuador provided an adequate alternative forum. Any dismissal in Ecuador under the new law would permit reassertion of United States jurisdiction, and the evidence indicated that Ecuadorian courts entertained successful tort actions and permitted similar claims to be joined in a single action. Less streamlined Ecuadorian procedures did not render the forum inadequate, no evidence that Ecuador incapable of acting impartially. Balancing of private and public interests, found that since all of the residents lived in or near Ecuador, and evidence located there, location of where injuries occurred, trial in Ecuador was more appropriate. The public interest tilted in favor of dismissal: difficulty in conflict of laws and application of foreign law, no interest in having it resolved in US, unfair to impose on jury.

Objections to case being brought in US:o Lack of Territorial jurisdictiono improper notice, or o failure to plead a cause of action that is cognizable under binding international law, o what other possible technicality can derail an ATS case?o FNC argument

Plaintiffs are foreigners: give little deference to P in their choice of forumo P are fishing for larger damages, more liberal policy to amend pleadings, allow class

actions, and discovery is very liberal, procedure rules are very liberal. Since Piper, do not have to give hardly any presumption to foreign P’s any consideration to their

choice of forum.

Doe v. Unocal Corp. (9th 2002)Facts: Unocal Corp acquired a venture called Total Myanmar. Hired Burmese military to provide security. P’s are Does 1-15. P alleged facts that military subjected them to forced labor, murder, rape, and torture. P sued in fed court ATS. Undisputed that Unocal knew Burmese military was providing security and other services for project.Issue: whether Unocal is liable under ATSHolding: Yes, except for torture.Rule: 1) Threshold determination: is it a tort by international standards. Forced labor, rape (as a form of torture), and slavery are jus cogens violations and violations of law of nations. 2nd determination: is it a state action. In some types of crimes, state action is not required and individual liability attaches. Slavery is one of them. Forced Labor is modern day equivalent.Rape, torture and summary execution require state action, ie state officials operating under color of law. However, if the crime is committed in pursuit of genocide or war crimes, individual liability attaches.3) To be liable for a tort under ATS, must have an actus reas and mens rea.Reasoning: Forced labor=slavery, no requirement of state action. Other acts committed in pursuit of forced labor, therefore no requirement of state action. The torture, those being tortured were not the Plaintiffs, so had not standing to bring suit on torture.

Remember: have to meet threshold of Rule 8: Beanal. Have to allege enough facts to put D on notice.

Prior case law that establishes these crimes as a tort.

Parallel Transnational Litigation & Antisuit Injunctions: Txtbk, pp. 743-57; Folsom, Gordon & Spanogle Handout #5, pp. 725-26; VIII. J. Recognition & Enforcement of Foreign Judgments (1) France: Txtbk, pp. 771-76

Responses to Parallel Foreign Litigationdismiss in whole or in part based on comitystay litigationmove forward and allow parallel litigationmove forward and issue anti-suit injunction

Finanz AG Zurich v. Banco Economico SA (2nd 1999)Facts: Exporter issued promissory notes to forfeiter Morgan Grenfell. The notes were guaranteed by Cayman branch of BESA, payable at the NY branch. Brazil’s Central Bank caused BESA to be placed in intervention. Morgan sold three notes to Finanz. It filed in Brazil and in NY state ∵ payment was refused on the notes. Issue: Whether the case in NY should be dismissed.Holding: Yes, it should be dismissed based on international comityRule: US courts should defer to comity unless it violates US public policy or principles of due process and fundamental fairness. Public policy concerns may involve commercial interests and ensuring liabilities are satisfied as part of its liquidation. Due process concerns in creditor situations include 1) treatment of creditors in same class treated equally in the distribution of assets (ie foreign vs. domestic creditors), 2) whether liquidators are held accountable to the court, 3) whether creditors have the right to submit claims, 4) whether liquidators are required to give notice to creditors, 5) if there are provisions for creditors meetings, 6) if domestic law favors its own citizens, 7) whether assets will be centralized and distributed 8) if there are provisions for an automatic stay and if the stay may be lifted to facilitate the centralization of claims.Reasoning: The court did not find that public policy was being violated. Faofaiters would not doubt the efficacy of NY as a commercial center. Since the OCC is overseeing the liquidation of the NY branch, no worry that it will not be handled correctly. Second, Due process concerns are not valid here, the creditors have been given notice and that the assets are being distributed centrally. It is NOT unfair to be paid in domestic currency, the US applies a similar practice in its bankruptcy proceedings.

Notes: Bank is intervened by Brazilian government. The bank was an instrumentality of the government. Foreign sovereign immunity didn’t apply because this transaction was commercial in nature, exception to the foreign sovereignty rule.

Goldhammer v. Dunkin Donuts, Inc (USDC MA 1999)Facts: D licensed to P the right to develop DD in UK under governing law UK. D terminated rights in the branded cases business. Filed in both US and UK courts (UK first).Issue: Whether P’s motion to dismiss should be grantedHeld: No, but a stay was granted pending the outcome of the English case.Rule: Parallel proceedings in foreign jurisdiction will not constitute an exceptional circumstance which justifies abdication of federal jurisdiction.Courts should look at relevant factors to determine whether a stay should be granted: 1) similarity of parties and issues in the foreign litigation, 2) promotion of judicial efficacy, 3) adequacy of relief available in the alternative forum (not required in FNC), 4) issues of fairness to and convenience of the parties, counsel, and witnesses, 5) possibility of prejudice to any of the parties, 6) temporal sequence of the filing of the actions.

Federal courts may only dismiss or remand cases only where relief being sought is equitable

or otherwise discretionary, but they may not do so in common law actions for damages. Reasoning: The court evaluated a stay based on all the factors and found they all leaned towards them. 1) same parties, 2) would be more efficient to stay, 3) relief adequate in English court and a stay provides an opportunity for claims in US to obtain relief. 4) does not favor either party, 5) deference to UK proceedings consistent with notions of international comity, and 6) favors a stay, english action was first, discovery in UK already occurred.

Dismissal or a stay in federal court due to state court proceedings take more effort. There may be mandatory obligations of the federal court. It would be easier to dismiss or stay in a foreign court. To dismiss such a case, it is based on discretion.

FNC have strings attached, precludes some actions in litigation. Dunkin Donuts chose this route because the benefit would have been greater for them.

Anti-Suit injunction- total end of comity.- When you ask a court to enjoin the other party from initiating a suit in a foreign court.- In the Laker Airways case, the British Defendants asked the English court to enjoin Plaintiff Laker from

initiating suit in the United States.- The concept has been accepted in some federal circuits.- A US judgment will not be enforced if there was an anti-suit injunction granted prior.-

French Enforcement of Foreign Judgments – See Outline- Exequatur: if you want to sue someone in a civil law country, you have to find a 1) nominated

action to sue that person. If there is no nominated action, you cannot sue that person. - French law recognizes foreign judgments of countries with which it has signed a 2) bilateral treaty

or entered into a multilateral treaty also ratified by France- For those others, judgments are enforced according to the 3) general rules elaborated by the Cour

de Cassition in Munzer v. Munzer.- Munzer v. Munzer: five conditions must be met:

8. foreign court had jurisdiction over Di. If the foreign court had SM or venue under the law where judgment was madeii.if French courts had exclusive jurisdiction (under French law), then the foreign court

will not have jurisdiction. iii. if the foreign court had international jurisdiction, rule is:

1. foreign court is deemed to have jurisdiction if the dispute is connected in a characterized manner to the country where the decision was made and if the choice of the court was not fraudulent.

9. that the procedure before that court was regular10.that the law applicable according the French rules of conflict of laws11.judgment complies with international public policy12.absence of fraud under the law

Judgment is not required to be final: will be enforced in France when the judgment would be enforceable in the foreign state, even if the judgment is subject to appeal or recourse. Some bilats require that the foreign judgment be final.Will not review the case based on the merits.Service of Process: is only to provide notice and opportunity to hear and present defense. Will be examined to see if process conforms with public policy.Damages: French courts cannot modify or put into question the measure of damagesDate and rate of currency exchange: can be made at the official rate on the date of paymentJudgment in tax matters or judgments awarding treble damages or punitive damages: these are considered private penalties, which French law only allows exact compensation for damages with some exceptionsFrench Public Policy: procedural standards reviewed under public policy requirement and enforcement will be refused if in violation of French public policy

party’s testimony under oath ahs been ruled contrary to public policy. Discovery generated evidence may be contrary to public policy then.

Reciprocity: does not apply. Resolution of private disputes should not be tied to public policy.Procedure of enforcement: judgment enforcement obtained from tribunal de grand instance. Action in exequatur is bought on residence or place where enforcement is to occur.

A French court will not look at which law applies if you make a choice of law.

States have adopted selected provisions from the Uniform Foreign Money Judgments Recognition Act, p 775 in book. Brussels convention and Regulation: makes it easy to enforce a judgment in Europe.All civil law countries: continental rule, law of where contract was made applies. Not like that in Kristinus, governmental interest. The final choice that NY made would conform with a decision that a French court would have made. It only confirms a judgment when a foreign decision is in conformity with French decision.

So first thing: always put choice of law in contract. It avoids the French courts taking a second look

How do you protect real property in France?solve it through drafting. Putting it in the contract – make the party waive right to litigate in France and to not to object to any recognition of proceedings.An attempt to circumvent mandatory law. Will not be recognized by French court.

US Considerations in recognizing and enforcing a foreign judgment:1. whether the foreign court had jurisdiction2. if the judgment was made with due process and fair justice3. if the judgment conforms with US public policy

a. can include comityb. Act of State Doctrine

Problem 8-12

P: VostD: Bank of ChinaAssume the jurisdictional amount has been met. You need to do this.Determine what court should sue: state or federal.Determine which courts you could sue in and why good/bad.Determine jurisdiction: SMJ, territoriality. If in federal court, what basis for jurisdiction: SMJ, Fed Question, Diversity What is the issue: unlawful dishonor of the letter of credit. What is the rule: Rule proof: the customs thing is involved in the underlyingStrict compliance of No allegation by the Chinese bank that the documents are fraudulentWhere is the obligation to be performed: The obligations is to be performed entirely in the US.

act of state issue question of whether to give extraterritorial effect to decision prior dealings w/ the NY branch. That NY bank branch is availing itself to doing business in the US.

Creating a form of reliance interests in the US.If you are the Chinese counsel, what would you argue:

reason for refusing to pay is for confiscation of goods in china. The confiscation of goods was an act of state. No contract established that says payment must be made in US, it will be made in China. It will

say that the NY branch is not bound to payVost will reply that obligation is to pay in NY. The bank took the documents in NY at the branch. If the obligation to pay is in China, then why did they take the documents? Now that they took the documents, they can’t go behind the documents and refuse payment because of this.You can make a lack of good faith argument.Assuming Vost were to lose, it would have to sue in China. Because the bank is an instrumentality of

China, it will have to sue in China. And the chances of recovery are minimal.

You need to do jurisdiction first. Then you need to spot the issues. Then you need to show off.

Exam2 essays and 10 multiple choice. Otherwise will be 3 essays.

M. Dec. 4 VIII. K. Evidence & Discovery: Txtbk, pp. 757-62; VIII. L. Recognition & Enforcement of Foreign Judgments (2) U.S.: Txtbk, pp. 767-71

Nippon Emo-Trans Co., Ltd v. Emo-Trans, Inc (EDNY 1990)

Facts: P: NET, Japanese Corporation. D: ETI, NY Corporation. Tey had a contract to serve as each other’s receiving agents for the shipments. A dispute arose over the profits and NET sued ETI in Japanese Courts. NET won, ETI appealed. NET went to NY to enforce the judgment, action to attach property of ETI in NY. Motion to confirm foreign judgment before court.Issue: Whether NET could confirm the attachmentHolding: no, because it could not prove necessity for the attachment. Rule:

1) Threshold consideration is whether the foreign judgment is entitled to recognition by NY courts by NY law. Must prove that the foreign court had in personam jurisdiction over the defendant in accordance with NY’s long arm statute

2) Attachment may be confirmed only if there is a need to continue the attachmenta. Need comes from need to secure the paymentb. Need may arise from

i. D’s inability to satisfy the foreign judgmentii.D’s likelihood to flee the jurisdictioniii. Transfer of assets to third parties so that D would lose effective control of the

funds.iv. Doubt on D’s assertions that it will pay.

1) NY Rule on in personam jurisdiction: a. foreign defendant can waive jurisdiction objections through showing up at the foreign court

to argue on the merits of the case.b. Alternative basis for jurisdiction is based on the foreign corporation doing business within

the state. Doing business includes those actions that: i. Fair measure of permanence and continuity allows suit on any cause of action, not

merely those arising out of business transacted in the stateii. Substantial, regular, and continuous sales or shipment of goods in the

state1. substantial can be measured by the value of doing business transacted in

the forum state, not just what portion of the total sales/shipments. iii. Agent performing work on behalf of defendant can also constitute doing

business in the state.1. The work must be sufficiently important to the foreign defendant and its own

officials would undertake to perform substantially similar services. 2. agent is acting genuinely on behalf of D and not for its own benefit3. Appropriate to look at nature of the business to determine whether it is acting

for the benefit of D.iv. Agent can include those who act more like independent contractors

Reasoning: the court found that Japan had jurisdiction over ETI because it was found to do business in Japan. ETI used an agent, first EJL and then NET. The amount of business done was found to be substantial and continuous shipment of goods into the forum based on the gross value of the business

transacted by ETI in Japan. The level of activity was found continuous ∵ of the relationship first with EJL and then NET over a period of years. And the activity directed at Japan was with a fair measure of permanence and continuity. The court found that there was insufficient need to allow the attachment. Found that ETI was likely to pay, no need to attach.

Evidence- inquisitorial system: French. judges ask questions to plaintiffs and witnesses- adversarial sytem: US- less than 1% of cases that are appealed are overturned. The cost of discovery, the amount of

information known increases the finality of the decision.- US enforces foreign judgements against its own citizens – more than any other country. - This is what drives

Week #15 W. Dec. 6 TBA

When Domestic Law is used as a source (rule):...............................................................................72 when there is an absence of a superceding international treaty..........................................72 silence of the parties (not stipulated in the contract or agreement)....................................72

By Party Agreement (when it is stipulated in the contract or agreement)........................72 When mandatory law preempts party choice...................................................................72 (CISG) When the parties choose to opt-out CISG or when the contract places the issue out of its scope..............................................................................................................................72

For Domestic Disputes:................................................................................................................72 Determining whether state law or federal law governs domestic contract disputes in the US 72

By the constitution and USC rulings, international law is our domestic law.....................................72o Federal law is supreme law of the land....................................................................................72

The Paquete Habana decision, 175 U.S. 677, 700 (1900).....................................................72 Ware v. Hylton 1796 – when conflict between intl law and state law, intl law prevails .........72 Whitney v. Robertson, 1888 – when conflict between intl law and federal law, the law enacted later prevails..................................................................................................................72 executive agreements and congressional executive agreements have same effect as treaties........................................................................................................................................ 72o Cheung v US 2000 – explicit statement by executive that treaty will not require implementing legislation.............................................................................................................72

CISG is a self-executing treaty that has direct effect in state courts because it is federal law. 72Self-executing vs. non-self-executing distinction.............................................................................72

Rule: Where a treaty or an international agreement is non-self-executing, the prior inconsistent statute will not be superseded until the treaty or international agreement is implemented...............................................................................................................................72 Rule: The prior inconsistent statute will be superseded on the date the implementing legislation goes into effect or some prescribed implementing act occurs....................................72 Foster v. Neilson, 1829.........................................................................................................72o Distinction made between self-executing and non self executing treaties...........................72 Factors to determine when a treaty is self-executing...........................................................72o intent of the states that are party to the treaty to det if they are self-executing.................72o Court examines provisions of the treaty and whether it was intended that courts were to implement and not congress.......................................................................................................72o If the treaty expressly states that it will require implementing legislation from Congress (in some cases, courts will decide this as well).................................................................................72o Non requires implementing legislation from Congress.........................................................72 WTO agreements are non-self executing.............................................................................72Example of non-self-executing:...................................................................................................72Example of self-executing...........................................................................................................72CISG Article 99..........................................................................................................................72

When a State ratifies, accepts, approves or accedes to this Convention after the deposit of the tenth instrument of ratification, acceptance, approval or accession, this Convention , with the exception of the Part excluded, enters into force in respect of that State , subject to the provisions of paragraph (6) of this article, on the first day of the month following the expiration of twelve months after the date of the deposit of its instrument of ratification, acceptance, approval or accession..........................................................................................72

International Sale of Goods.......................................................................................................72Risk-Based Approach to Int ’ l Sales of Goods (ISGs) ...........................................................72Document Trail:........................................................................................................................72Three Major Contracts in ISGs...............................................................................................72

1. Contract for the sale of Goods (k).......................................................................................722. Letter of Credit (LoC)..........................................................................................................72 Law that governs in US: UCC............................................................................................72 Law that governs RoW: UCP (Uniform Customs and Practices for Documentary Sales, from ICC) 723. Bill of Lading (BoL)..............................................................................................................72

o Nonnegotiable Bill of Lading.........................................................................................72

o Negotiable Bill of Lading...............................................................................................73 Carriage of Goods by Sea Act (COGSA)............................................................................73

o limits liability of carrier to $500 per package unless shipper declares otherwise in BoL 73

Commercial Terms under the ICC IncoTerms...........................................................................73 E – departure (once leaves plant, is buyer assumes risk) .....................................................73 F – main carriage unpaid by seller .......................................................................................73 C – main carriage paid by seller ...........................................................................................73 D – upon arrival ....................................................................................................................73

Biddle Brothers v. E Clemens Horst Company , 1 King ’ s Bench 934 (1911) .............................73Holding: A CIF sale of goods is effected by actual delivery. Defendant failed in his duty. Find for plaintiff. Farwell and Vaughn Williams argue that absent an express provision demanding payment against documents, payment is made upon actual delivery (default).......................73Kennedy represents the current principle, that deliver is effected upon delivery of documents................................................................................................................................................ 73

E Clemens Horst Company v. Biddle Brothers, House of Lords (1912) ....................................73Rule: delivery of the bill of landing when goods are at sea is treated as delivery of the goods themselves, this rule being so old, need no authority to cite it...................................................73

§ 320(4) UCC (2003) provide the same as the ruling in Horst v. Biddle, unless otherwise agreed upon, payment upon tender of documents and buyer cannot demand actual delivery in substitution of the documents............................................................................................................................73II.C. Contract of Affreightment, Bills of Lading & Insurance.................................................73

Contract of Affreightment............................................................................................................73common carrier: liability for damage or loss in the course of conveyance, except for:................73

o NJ Steam Navigation Co. v. Merchant ’ s Bank of Boston (US 1848) ........................73Private carrier:.............................................................................................................................73

o Liability for loss or damage to the extent it was caused by a breach of an obligation in the contract of carriage. Commercial Molasses Corp v. NY Tank Barge Corp (US 1941) .......73o liable where breach of K is proximate cause of loss or damage and/or due to failure to adopt ordinary standard of care...............................................................................................73

COGSA Carriage of Goods by Sea Act of the United States ............................................................73 Applies to every BoL or document of title that evidences a K for the carriage of goods by sea to or from a U.S. port............................................................................................................73 it applies to common carriers, shipowners, private carriers whenever BoL is used and “carrier” is executing K of carriage to or from the US..................................................................73 It is a federal statute and does not apply to transport outside the US.................................73 liability limit is $500 per package – so it is incumbent upon the seller to insure. .................73 When use a clause paramount, if stipulates COGSA is the governing law, then the inland portion of transportation is covered by COGSA and not other law. COGSA doesn ’ t normally apply unless there is such a stipulation.................................................................................................73

FD Import & Export Corp. v. M/V Reefer Sun, SDNY, 2002 ......................................................73Rule: Pursuant to FAA, a district court must stay a proceeding if the parties have agreed in writing to arbitrate an issue.....................................................................................................73Must consider 4 factors:...........................................................................................................731. whether the parties agreed to arbitrate...........................................................................732. the scope of the agreement: if the dispute arises from the agreement............................733. if federal statutory claims are asserted, whether congress intended those claims to be non-arbitrable, and..................................................................................................................734. if only some of the claims are arbitrable, whether to stay the balance of the proceedings pending arbitration..................................................................................................................73

Rule: Valid constructive notice is if you should have known something, you ’ ll be held responsible for what you should have known . Steel Warehouse . ........................................73Rule: terms of a charter party or BoL is binding on non-signatories if they have received constructive notice. Stolt Tank Containers, Inc. v. Evergreen Marine Corp. (2 nd 1992). Rule: If an arbitration clause is broad, it may govern disputes of non-signatories and parties not listed in the contract. Broad meaning to cover all disputes arising under the charter. A narrow arbitration clause only applies to certain parties......................................................73

Bill of Lading.................................................................................................................................73

Fruit of the Loom v. Arawak Caribbean Line Ltd. SDFL 1998 ..............................................74Rule: when a BoL is issued to destination, it is a through bill and all connecting carriage is subject to its terms. Mexican Light & Power Co v. TX Mexican Railway . This means that carriage is subject to all the BoL terms................................................................................74Rule: COGSA and 26 USC App § 1307 – nothing prevents a carrier from entering into an agreement as to the responsibility and liability of the carrier...............................................74Rule: Parties to a bill of lading may extend a contractual benefit to a third party by clearly expressing their intent to do so. Robert C. Herr and Co v. Krawill Machinery Corp . .............74Rule: Himalaya ’ s Clause use of agent and independent contract is sufficient to apply the benefits of a BoL to a terminal operator, particularly when it is obvious that they cannot deliver to destination without use of an agent or contract. Certain Underwriters v. Barber Blue Sea Line.......................................................................................................................74

Steel Coils Inc v. M/V Lake Marion (Ct of Appeals 5 th Cir 2003) .............................................74Issue 1: Whether the lower court improperly shifted the burden to the D to prove that the cargo was in damaged condition.............................................................................................74Reasoning: COGSA requires P to establish a prima facia case that cargo was loaded in undamaged condition and discharged in damaged condition. Once P establishes this, then it is BoP on D to show that it was not their fault. BoL is prima facia evidence of the condition of the goods at the time of receipt by carrier. P had proved therefore their burden through the evidence supplied....................................................................................................................74Issue 2: Whether D had not taken the due diligence to ensure the steel would be properly stored during voyage, so that it caused rust, thus violating the contract................................74Rule: per Cogsa, carrier has a duty of exercising due diligence in making the vessel seaworthy and capable of performing the work at hand..........................................................74Reasoning: If P has established the prima facia case, burden shifts to D to proved that they exercised due diligence to prevent the damage, or that the cause of the damage is an exception as set forth in 1304(2) of COGSA (perils and accidents of the sea and latent defects not discoverable by due diligence). Due diligence is efforts to make the vessel seaworthy means ensuring reasonable fitness to perform or do the work at hand...................................74Rule : Duty to exercise due diligence in nondelegable. ............................................................74Rule : there are exceptions to duty of due diligence in certain exceptions, those being that the sea was perilous and latent defects caused damage and that due diligence wouldn ’ t have detected the latent defect in any case....................................................................................74Rule: Liability is limited to $500 per package unless a higher value is declared by the shipper. Parties to the contract are limited by this rule. This limitation can be extended to agents of the carrier if there is a Himalaya Clause which extends a carrier ’ s rights to its agents. ..........74Rule : A noncarrier can be held liable in tort ouside of COGSA if there is not a Himalaya Clause that extends a carrier ’ s rights to its agents. ............................................................................74

Caemint Food Inc v Lloyd Brasileiro – where goods shipped in packages that prevent carrier from observing damaged condition at time of loading, a clean bill of lading is not prima facia evidence for the P........................................................................................................................74U.S. v. Lykes Bros . – where because of the perishable or intrinsic nature of the commodity, the internal condition is not adequately revealed by external appearances, P has a considerable burden of going further to prove actual condition – a clean BoL or visual inspection of external container is not prima facia evidence..........................................................................................74Jamaica Nutrition – COGSA imposes a nondelegable duty on the carrier to exercise due diligence to make the vessel fit for carriage. this is not abrogate by its covenant to also clean the vessel to the charterer ’ s satisfaction. Ie it does not waive the duty to perform if the other party signs off on the work..........................................................................................................74American National Fire Insurance Co. v. Mirasco Inc.........................................................74

Terms of the agreement were that rejection coverage was for cargo that had been rejected by governmental authorities. However, exclusions to coverage include 1) loss of market, 2) if an embargo is announced while shipment is en route, insurer only liable for return freight and 3) mislabeling or for cargo that fails health standards.................................................................74Issue 1: Mirasco had purchased rejection insurance from the insurers. Whether the cargo was rejected. Ie whether the policy covers what happened....................................................74Holding: not dispute of material fact that the cargo was rejected as defined by the policy. It was rejected and policy may apply..........................................................................................74

Rule: loss of market is when a certain type of product is no longer in demand with its intended purchasers, ie loss of customers. This is different than loss of market value..........................75Rule: an embargo is a governmentally imposed quantitative restriction of zero on the importation of merchandise. Kmart Corp v. Cartier. Embargos can be on products for having certain characteristics, such as adulterated or unapproved foods, and for not conforming to federal standards.....................................................................................................................75

Queens Ins. Co of America v. Globe and Rutgers Fire Insurance Co. (US 1924) the US should look to English law for the applicable rules of marine insurance when there is no codified federal law that applies...............................................................................................................75Wilburn Boat Co v. Fireman ’ s fund (US 1955) ......................................................................75

The USC ruled that, in absence of controlling federal admiralty law principle, the courts must apply the applicable state law rule..........................................................................................75This is in contradiction to Queens............................................................................................75Poor law due to hard case........................................................................................................75

International Trade: Border Measures......................................................................................75Tariff Measures............................................................................................................................75

Tariffs are Revenue-generating trade barriers..................................................................75 Determined according to product's classification, value and origin..................................75 "Bound" levels (caps) fixed under GATT Art. II..................................................................75 Observe "Most Favored Nation" Principle..........................................................................75o Regional trade agreements are exception ( e.g. , NAFTA, EU, MERCOSUR, etc.) .................75

Non-Tariff Measures . . ................................................................................................................75 Quotas → Numerical limits on certain imports ...................................................................75 Non-revenue-generating trade barriers............................................................................75 Mostly Illegal under GATT Article XI..................................................................................75

Export Bans or Restrictions → Limits on certain exports ...............................................................75Illegal under GATT Article XI.....................................................................................................75However, there are (exceptions for conservation, etc.)............................................................75Sanitary and Phytosanitary Inspections/Certifications/Embargoes...........................................75WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS)................75Technical Standards.................................................................................................................75WTO Agreement on Technical Barriers to Trade (TBT)..............................................................75"Cultural" Exception.................................................................................................................75GATT Art. IV (i.e., require the exhibition of domestically made films for a specified minimum proportion of total screen time)...............................................................................................75

U.S. Trade and Trans'l Controls: U.S. Trade and Trans'l Controls: Treasury's OFAC & Commerce's BIS Treasury's OFAC & Commerce's BIS.........................................................75

OFAC and BIS Regulations (re Transfers of U.S.-Origin Goods, Technology and Funds) often overlap..................................................................................................................................... 75

o Ban trade and investment with certain embargoed countries (e.g., Cuba)...............75o Restrict certain transactions regardless of country of destination (e.g., proliferation, WMDs)..............................................................................................................................75o Target Specially Designated Nationals ("SDNs") or individuals in the "Denied Persons List" 75o Covered transactions can be prohibited or controlled ( i.e. , subject to export license)

75 Jurisdictional Bases Vary...................................................................................................75

o Extraterritorial Jurisdiction........................................................................................75o "Nationality Principle": acts of U.S. persons (i.e., natural or legal persons) anywhere on the globe (includes U.S. residents anywhere)..............................................................75o Territorial Jurisdiction................................................................................................75o Jurisdictional link: activity in the United States or utilizing an "instrumentality of U.S. interstate or foreign commerce," whether or not physically present in the United States75o (includes foreigners in the U.S.) Any person in the US..............................................75

Controls prohibit evasion efforts.......................................................................................75 Domestic transfers of technology to foreign nationals deemed as exports from the U.S..75 Any subsequent shipment of covered technologies or goods from any country treated as direct export............................................................................................................................75

Knowledge requirements are strictly enforced.................................................................76o Willful blindness does not exempt culpability...............................................................76

o Triggers/Red Flags/Issue Spotters.....................................................................................76 – Country of destination .................................................................................................76 – Sophistication of items to be exported ........................................................................76 – Identity of end-user .....................................................................................................76 – Intended use ...............................................................................................................76

o Burden is on the exporter to determine whether a transaction is covered and to obtain an export license, if applicable.....................................................................................................76o Note: Foreign-origin goods or technology that enter or transit the customs territory of the U.S. can be treated as goods or technology produced in the United States.............................76

Other Statutory Authorities Other Statutory Authorities..................................................76 Antiboycott Laws..............................................................................................................76

Mandate non-compliance with foreign-issued boycotts — focus on actions ....................76 U.S. persons subject to reporting requirement .............................................................76

Economic Espionage Act..................................................................................................76 Foreign Corrupt Practices Act...........................................................................................76

The Sales Contract – Choice of Law: .........................................................................................76Kristinus v. H Stern Com E Ind SA (SDNY 1979) ....................................................................76

Rule: Federal court sitting in diversity must apply state choice of law. Klaxon doctrine USC . 76Rule: New York court must balance New York ’ s interest in having New York law apply against a foreign state ’ s interest in having foreign law apply. Governmental interest approach ............76To determine the foreign state ’ s interest, can look at what effect it would have at: ................761) protecting the integrity of the judicial process against the taints of perjured and biased testimony,................................................................................................................................762) protection of persons who transact business in Brazil from unfounded contractual claims by requiring such claims to be enforceable;............................................................................763) foreign state ’ s paramount interest in regulating conduct within its borders. ....................76To determine New York ’ s interests, look at: ..............................................................................761) New yorks interest in ensuring that persons who transact business within its border honor obligations, including contracts made elsewhere;...................................................................762) what would NY do if the contract had been made within its borders................................76Continental rule: validity of a contract is governed by the law of the place where it was formed.....................................................................................................................................76 NY substantive law applied because it balanced the interests of NY state interests in applying its own law and Brazil ’ s interest in applying Brazilian law .........................................76NOTE: CISG didn ’ t apply here because it was a sale for personal use ......................................76

Restatement Conflicts of Law § 188.............................................................................................76 rights and duties of the parties are determined by the state law that has the most significant relationship to the transaction and the parties...........................................................76 in absence of express governing law look to:.......................................................................76

o place of contracting..........................................................................................................76o place of negotiation..........................................................................................................76o place of performance.......................................................................................................76o location of the subject matter of the contract..................................................................76o domicile, residence, nationality, place of incorporation and place of business of the parties..................................................................................................................................... 76

Convention on the law Applicable to Contractual Obligations:.....................................................76Overview of CISG.........................................................................................................................76

is uniform substantive law that applies in many cases w/o need for CoL analysis............76 in US will displace UCC in ISC...........................................................................................76 it only applies to international sales contracts of goods...................................................76

is not mandatory public law but supplementary private one...............................................76 terms of contract will override any conflicting terms in the convention...............................76

it is not comprehensive contract law................................................................................76 Reduces resorting to CoL analysis by displacing domestic law on those two issues.............76

On other issues, forum needs to look at K or other source of law to rule on other issues, must make CoL analysis..........................................................................................................76

exclusions from coverage and does not apply in these situations:...................................77o when parties expressly exclude from coverage................................................................77o validity of the contract.....................................................................................................77o third party rights..............................................................................................................77o property rights in the goods.............................................................................................77

Where the parties have not agreed to domestic law and where CISG does not apply, courts will have to do choice of law analysis........................................................................77

Sphere of Application of CISG................................................................................................77 contract is international is when the parties have their places of business in different contracting states....................................................................................................................77 If the action is brought in a third country which is a member, CISG will govern so long as the parties are international and they have not expressly opted out of CISG..........................77

Article 1(1)(b).......................................................................................................................77o US didn ’ t want it, got the opt out in Art 95 instead. .........................................................77

o fear was that when one contracting party that was not a signatory, that language would displace US law and not displace the law of foreign non-contracting states..............77

Convention does not apply to Certain sales:................................................................................77(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;.................................................................................................77(b) by auction;.........................................................................................................................77(c) on execution or otherwise by authority of law:...................................................................77(d) of stocks, shares, investment securities, negotiable instruments or money;......................77(e) of ships, vessels, hovercraft or aircraft;..............................................................................77(f) of electricity.........................................................................................................................77

CISG applies to instruments that give bearer title to goods (BoL)...................................................77CISG Application..........................................................................................................................77

when both parties are from contracting states.................................................................77 when one party is from a contracting state, either the CISG or the domestic law of the non-contracting state applies under subparagraph (1)(b)........................................................77 when one party is from a contracting state and the state has excluded (1)(b) through declaration under Art 95, either domestic law may apply........................................................77 where domestic law would apply CISG.............................................................................77

CISG CoL Provision is Triggered....................................................................................................77 Art 1(1)(b)........................................................................................................................77 when either buyer or seller is not a signatory..................................................................77 US opted out. CISG will not apply, either domestic law will apply.....................................77

III.C. Scope of the Contract........................................................................................................77Amco Ukrservice & Prompriladamco v. American Meter Co. 2004 EDPA ...........................77

Rule: CISG does not apply to distributorship agreements (framework for future sales of goods, but do not lay down precise prices and quantity terms). Helen Kaminski v. Marketing Austrialian Products . ................................................................................................................77Rule: but it does govern sales contracts that the parties enter pursuant to those agreements. ................................................................................................................................................ 77

Holding: Although CISG may have governed discrete contracts for the sale of goods that the parties had entered pursuant to the joint venture agreements, it does not apply to the agreements themselves. Am is arguing that the supply and credit provisions are severable and governed by the CISG. The CISG says that where there is no definite price and quantity, the proposal is indefinite and therefore unenforceable. CISG does not govern at all. Court found that PA law governed. Court doesn ’ t like the use of CISG by D ∵ of inequitable result. Seller can compel buyer to perform, however, buyer will not have no such argument, seller can always say that no contract ∵ not definite. .................................77

Why does PA law apply here?..................................................................................................77 that Prendergast, had the actual or apparent authority to make the commitments on behalf of American...............................................................................................................77 and PA is his place of business.....................................................................................77 Once found that CISG didn ’ t govern, had to go to private international law analysis . . .77 This is Diversity of Citizenship case – P is Ukrainian, D is US. Could only make this a

federal question if it asked for declatory judgment and well pleaded complaint thing.........78 What law applies? Can ’ t be federal law b/c of it ’ s a contract issue – an unenumerated issue. Therefore must be either state or foreign law...........................................................78 The court found some reasons for foreign law not to apply..........................................78

Things to Note:............................................................................................................................78Meter lawyers failed to put in a governing law provision – don ’ t forget to do this! You are an advocate for your client ’ s rights ..............................................................................................78Erie/Klaxon prohibits forum shopping for rules most favorable to your case............................78

UNICITRAL CLOUT Case 131 – CISG is applicable when the parties have their PoB in different CISG contracting states and the SICG applies to agreements for the sale and delivery of software. When the parties have agreed on the particulars of the sale (ie expressing definiteness), a sales contract has been concluded.....................................................................78CISG may apply to:...................................................................................................................78

Discrete contracts to the sale of goods pursuant to such agreements.............................78 Software – but you need some good – like a disc or some other fixed medium, can ’ t just download it off the web...........................................................................................................78 Goods to be produced, can be seen somewhat as a service – but services aren ’ t included.

78o If an overwhelming portion of the contract is the provision of services, will be considered a service............................................................................................................78o ie when you provide all the machinery, and you generally provide all the means for production, it wil be considered a service............................................................................78

CISG applies to the BoL to the things above because – the portion of the transaction BoL takes care of is delivery in the sale of goods...........................................................................78

UNICITRAL CLOUT Case 122 – CISG is not applicable to a contract that is not a contract for the sale of goods or production of goods. A characteristic of sale of goods is the transfer of property in an object. The object here is a marketing report, while on paper, is a transfer of the right to use the ideas on the paper (is this a copyright issue as well?)....................................................78Gap vs. Exclusion.....................................................................................................................78 Gap – interstitial issue that the CISG does not address ........................................................78

o go to general principles....................................................................................................78o then to PIL and then domestic law...................................................................................78

Exclusion – when the CISG excludes an issue from scope of coverage .................................78o No need to look at general principles...............................................................................78o go directly to PIL substantive law.....................................................................................78

CISG General Principles..........................................................................................................78 requirements for good faith and reasonableness 7(1)..........................................................78 reasonableness – circumstances to be interpreted by reasonable person standard Art. 8(2) & (3)............................................................................................................................................ 78 primacy of contract and freedom of contract (6).................................................................78 generally no formalities (11)................................................................................................78 presumption of a binding contract (16, 18(1), 19(2), and 21)..............................................78 general rule against formalities...........................................................................................78

o statute of frauds – don ’ t need writing ...............................................................................78o parol evidence – can look at parol ....................................................................................78

due consideration is to be given to all relevant circumstances of the case. MCC Marble Ceramic Center 11 th Cir 1998. said that parol evidence rule should apply – applied CISG analysis................................................................................................................................78 Beijing Metals v. American Business . TX court applied TX parol evidence rule in a suit between a TX businessman and a Chinese seller. Said that the parol evidence rule applied regardless of whether TX law or the CISG applied. Why?....................................................78

It was a gap issue – on why would first go to general principles, would never get to domestic law if go to general principles, which covers it..................................................78

parties may vary the convention and displace domestic law. Art 6................................78 exception to art 12 – parties cannot abrogate the writing requirement if it is mandatory law in the signatory country.....................................................................................................78

GPL Treatment, Ltd v. Louisiana-Pacific Corp, Oregon S Ct. 1996....................................78Judge said that plaintiff ’ s “waived” fed law – CISG. ..................................................................78

Article 12: contracting party w/ PoB in state can preserve a writing requirement by declaring under Art 96 that Art 11 does not apply. PoB in place where litigation being held..................79

III.D. Formation of the Contract................................................................................................79 is subject to the rules of Art 1013 (Pt I), interpretation of the contract................................79 is independent of Pt III, rights and obligations of the parties...............................................79 can declare under 92 that it exclues Part II or III..................................................................79 14 – 17 – offer ......................................................................................................................79 withdrawal – 15 ....................................................................................................................79 revocation – 16 ....................................................................................................................79 termination of an offer – 17 ..................................................................................................79 acceptance – 18 ...................................................................................................................79 effect on an acceptance that varies the terms of the offer – 19 ...........................................79 time allowed for acceptance – 20-21 ....................................................................................79 withdrawal of acceptance – 22 .............................................................................................79 time when contract is concluded – 23 and 24. .....................................................................79Offer – Article 14(1) .....................................................................................................................79

offeror must intend to be bound by offer..........................................................................79 must be a definite offeree – ie name specific people or entities .......................................79 and general definiteness of the offer in price and quantity; failing this, a prior course of dealing indicating quantity and price may be sufficient...........................................................79 If accepted with definiteness and intent to be bound, this is a contract...........................79

Withdrawal Art 15........................................................................................................................79 offeror has power to withdraw an offer any time before the offer reaches the offeree, even if the offer is “irrevocable” – generally is an offer that is mailed or not yet seen by the buyer....................................................................................................................................... 79

Revocation Art 16........................................................................................................................79 offeror has power to revoke even after it has sent the offer and before it has been accepted..................................................................................................................................79

o unlike C-L, which says promise is irrevocable after consideration has been given or an option has been created......................................................................................................79o C-L mailbox rule: when the offeror has authorized offeree to respond by mail, offeror cannot revoke an offer even if consideration has not been given........................................79o UCC – firm offers – when offer made by a merchant and claims is irrevocable. ............79o Art 16(2) – it cannot be revoked if it states that the offer is not revocable within a period of time or when it was reasonable for the offeree to rely on offer as irrevocable and offeree has acted in reliance on the offer.............................................................................79

Certain offers are not revocable, even if consideration has not been given.....................79Acceptance (18)..........................................................................................................................79

- Acceptance = Assent + Communication or “Other Contact”............................................79- Battle of the form – the last shot is the one that the last person sends and is not objected to by the other party, the nonmaterial differences and additions are considered part of the contract...................................................................................................................................79- CISG allows the last shot to prevail if it ’ s not a material change and the other party performs or conduct constitutes acceptance...........................................................................79- The common law – mirror image approach. If one change, no contract. .........................79- UCC approach – tries to save contracts – says there is acceptance, but only of those terms and conditions that agree. The other terms are knocked out........................................79

FILANTO v. CHILEWICH Intl Corp. Proc Hist: Plaintiff Italian corporation moved the United States District Court for the Southern District of New York to enjoin arbitration or to order arbitration in its federal district. Defendant New York corporation moved the court to stay the present action pending arbitration in Moscow Facts : Plaintiff Italian corporation Filanto entered into an agreement with defendant New York corporation Chilewich where it would provide shoes. The shoes would be used to satisfy an agreement between defendant ’ s agent Byerly Johnson and a Russian company, Raznoexport. After a disagreement between Chilewich and Filanto, Filanto brought this action seeking to enjoin the arbitration required by the Russian Contract between defendant ’ s agent and the Russian company or to order arbitration in New York. Defendant moved the court to stay the present action pending arbitration in Moscow...............79

Reasoning: Court finds that the Plaintiff ’ s actions constituted acceptance and that there was a

sufficient agreement in writing to arbitrate disputes between the parties. The P had opp to object, but did not do so in a timely fashion. It had multiple opportunities to object, but failed to............................................................................................................................................. 80

Pratt & Whitney v. Malev Hungarian Airlines (1993).........................................................80P ’ s Argument : that the offers were definite because the parties could determine based on the aircraft type the number of engines and the price......................................................................80D ’ s Argument : that the offers were not definite because there was neither quantity nor price on the offers and that they could not be determined by the offers themselves. Also, Malev didn ’ t perform under the contract, such as buy finalizing the contract.................................................80

Holding : there lacks an appropriate explicit offer from plaintiff and no clear indication as to the subject of the service in Defendant ’ s declaration of acceptance, therefore no sales contract had been established between the parties................................................................80

Performance of the Contract..................................................................................................80payment..................................................................................................................................80Delivery...................................................................................................................................80Seller, to satisfy its delivery obligation must:..........................................................................80

fulfill the contract requirements...........................................................................................80if contract silent to delivery at any other particular place, then Article 31 of CISG applies:. 80sale is carriage of goods – to hand over the goods to the first carrier ..................................80in other cases where goods are to be drawn from stock or to be manufactured, and where contract relates to specific goods, place is where the goods are located or manufactured..80in other cases, place of seller ’ s business. ............................................................................80CISG applies to supply obligations in absence of agreement on delivery, insurance, and risk of loss..................................................................................................................................80

Conforming Goods...................................................................................................................80- Seller has obligation to deliver goods that meet reasonable expectations.......................80- Buyer expects at minimum to deliver goods that conform to the contract in quality, quantity and condition.............................................................................................................80- Where contract is silent or does not resolve an issue related to to confiormity of goods, buyer still has reasonable expectations governed by domestic law.........................................80- UCC has law dealing with three types of warranties, ie obligation of seller......................80

o § 2-313 Express warranty.............................................................................................80o § 2-314 Implied Warranty.............................................................................................80o § 2-315 Implied warranty of fitness for a particular purpose.........................................80o § 2-216(2) implied warranties can be disclaimed while express cannot........................80

Medical Marketing Intl Inc,(MII) v. Internazionale Medico Scientfica (IMS) (Conforming Goods)......................................................................................................................................... 80

Rule: 1) must evaluate the international character of convention and promote uniformity in application (ie must agree with precedent).............................................................................802) goods conform if they a) fit purpose for use or b) fit for any particular purpose express or implied to seller and relied on by buyer – Art 35(2). ................................................................80(3) To avoid a contract, seller ’ s breach must be fundamental in nature – Art 49. ...................80(4) A breach is fundamental when it results in such detriment to the party that it is substantially deprived of what was it was entitled to under the contract, unless the party in breach did not foresee such a result – Art 25. ..........................................................................80Rule 2: A seller is not generally obligated to supply goods that conform to public laws and regulations of the buyer ’ s countries, except in cases where (1) the public laws of both seller and buyer ’ s countries are the same, (2) buyer had informed the seller about those regulations, or (3) if due to special circumstances (existence of seller in buyer ’ s country), seller knew or should have known about the regulations at issue . Decision of the German Federal Supreme Court of Civil Affairs. 1995......................................................................................................80

BP v. Empresa Estatal Petroleos de Ecuador 5 th Cir. 2003 (Lack of Conformity) ..................80Rule: Even if usage of Incoterms is not global, the fact that they are well known in international trade means that they are incorporated through article 9(2). CFR is such a term. In CFR shipments, seller is to pay costs and freight to transport to delivery port, but pass title and risk of loss to buyer once goods ‘ pass the ship ’ s rail ’ at the port of shipment. Goods should be tested for conformity before risk of loss passes to the buyer. Art 36(1). In such a case, subsequent loss or damage should be sought against the carrier or insurer..................80

However, as an exception to this rule, the seller can be liable if it knew or could not have been unaware of the lack of conformity of the goods. Therefore, the buyer may rightfully avoid the contract if this is so..................................................................................................................81

Disclaimer of Warranty................................................................................................................81CISG is silent on the disclaimer of warranty. In a case is governed by CISG, UCC may be used to decide an issue excluded from the scope of the CISG..........................................................81UCC § 2-316(2): in order to properly exclude the implied warranty of merchantability, the language must mention merchantability and be conspicuous. An exclusion of the implied warranty of fitness for a particular purpose does not need to mention the warranty, can be done in general language, but the disclaimer must be in writing and conspicuous.................81

This will depend on how the court interprets this rule. If they see it as a rule of validity, UCC will apply as issues of validity are excluded from scope of the CISG Art 4(a). ....................................81If it is a rule of interpretation, it is superceded by Art 8(2) – the rule on interpretation. ..............81Payment by Buyer....................................................................................................................81

Buyer ’ s basic obligation: TO pay the price. ..............................................................................81Unilex, D 1995-1, France..........................................................................................................81buyer ’ s bound when there is an offer that expresses sufficient definiteness in regard to price and quantity 14(1). If there is acceptance, either express or through seller ’ s conduct, there is a contract. The price paid must be the at price should he pay? Market price at the time he shipped.................................................................................................................................... 81

Excused Performance..............................................................................................................81Doctrines of frustration, impossibility, and force majeure in domestic courts..........................81- War, government prohibitions, unavailability of transport routes, strikes, fire, and economic conditions................................................................................................................81- Art 79 of CISG allows an excuse for failure if it was due to an impediment beyond his control, if seller could not reasonably been expected to taken the impediment into account at the conclusion of the contract or have been able to avoid it or overcome it or its consequences..........................................................................................................................81- It is not an impediment to performance when an event makes performance more difficult or costly...................................................................................................................................81- It is not an impediment if some part of it was reasonably foreseeable (having some knowledge of the circumstances that lead to the impediment)...............................................81- It is not an impediment if seller refuses to overcome it, ie compensate for loss, find a substitute, etc..........................................................................................................................81- If seller is excused, buyer cannot sue for damages, but can avoid the contract. Can get restitution for what it has already paid. Seller does not have to deliver the goods.................81Tsakiroglou v. Noblee Thorl House of Lords, 1962 ..............................................................81Rule: Contract clause 6, force majeur clause that in case of war, blockade that prevents the shipment within time fixed, period for shipment shall not extended beyond two months. After 2 months, contract shall be cancelled. Force majeur is a legitimate reason for failure to perform. Was the contract frustrated by the event?...............................................................81

Performance Delegated to a Third Party..............................................................................81Unilex, D1996-3.4 Germany................................................................................................81Court found that the seller refused delivery unless he got advance payment. This was not a term in the sales contract. Seller was not exempted for performance because the failure was not an impediment beyond it ’ s control. ...................................................................................81

Remedies...................................................................................................................................81Overarching philosophy when it looks at remedies: to preserve the relationships.......................81Leads to remedies that allows breaching party to cure the relationship......................................81Litigation and arbitration are very expensive – should be the last resort. ....................................81

Seller ’ s Remedies ....................................................................................................................81Anticipatory Breach & Installment Contracts – Art 71-73 .............................................................81

Letter of Credit.............................................................................................................................81Two sources of law, the UCP and UCC......................................................................................81

Letter of Credit Operations..........................................................................................................81- Letter of Credit Basics: applicant and beneficiary............................................................81- Documentary Credit.........................................................................................................81- Bank is involved b/c it gets a fee, a % of the deal perhaps..............................................81

- In the transaction, the most important bank is the issuing bank......................................82- Payee – the beneficiary – the party entitled to payment. Sometimes can be the seller. Seller could sell the letter of credit to someone else to pay a debt, etc. So can be an endorsee of seller.................................................................................................................................... 82- Applicant – party who established the credit. Sometimes is the buyer. Sometimes the parent company. Sometimes is another party that owes money to the buyer.........................82- Confirming Bank: Assume an obligation to pay. They are the seller ’ s bank. The issuing bank engages the confirming bank, or the seller may say that they want to use this bank.....82- Nominated bank – bank engaged by issuing bank, but is not obligated to pay under the letter of credit..........................................................................................................................82- Advising Bank: don ’ t have an obligation to pay. It is to make reasonable efforts to tcheck the authenticity of the credit that it advises. They tell seller that letter of credit has been opened. They have a notice obligation. That is where their obligation stops.........................82Maurice O'Meara Co. v. National Park Bank , 239 N.Y. 386 (N.Y. 1925) Facts : Ronconi & Millar assigned their rights to the letter of credit to P. P ad attempted to collect on letter of credit. L/C required 3 documents, which P ad provided, but D-Bank said that the paper was not satisfactory because it did not furnish evidence of the tensile strength of the paper........82

Rule:................................................................................................................................... 82When bank agrees to pay to a certain amount on presentation of documents specified in the letter of credit, it must.............................................................................................................82An obligation to present documents is satisfied when the documents meet the required description in the L/C...............................................................................................................82Beneficiaries of the letter of credit must be parties to any modification for the beneficiary to be bound by such obligations. Is otherwise unenforceable.....................................................82

Damages are the amount due to the seller less what it did to minimize the damage. When S acts in good faith or with reasonable care or diligence in minimizing damages, it is due what is owed on the drafts...................................................................................................82Primary purpose of the L/C is assurance to the seller of prompt payment against documents...........................................................................................................................82

JH Rayner v. Hambro ’ s Bank, Ltd. 1 King ’ s Bench 37 1943 ..................................................82Rule: The drafts with the accompanying documents are to be in strict accord with the credit as opened. No room for documents that are almost the same, or which will do just as well...82

Hanil Bank v. P.T Bank Negara Indonesia (SDNY 2000) ......................................................82Rule: Since parties agreed to accept the provisions of UCP, then it governs. Fundamental obligation of bank to pay upon submission of documents which appear on their face to conform with the terms and condition of the letter of credit is absolute, absent proof of intentional fraud......................................................................................................................82

Discrepancies that mislead or prejudice the bank is a nonconformity..................................82Where internal discrepancies or ambiguity are created by the issuer, the ambiguity will be resolved agains the issuer....................................................................................................82Incumbent upon beneficiary to check if LC is correct. It is beneficiary ’ s responsibility to discover error in the LC........................................................................................................82UCP allows bank to approach the payor for waiver of any discrepancies with or without the beneficiary ’ s approval UCP Art 14(c). Is not a violation of good faith or fair dealing. ..........82

Beyene v. Irving trust Co (2 nd Cir 1985). Unless the name of the intended beneficiary is unmistakably clear despite an obvious typographical error, any difference int eh name constitutes noncompliance..........................................................................................................82Voest-Alpine Trading USA Corp.v Bank of America (5 th Cir 2002). Different placement of USA in name did not justify dishonor. Looking at the documents and the transaction as a whole. Issuing bank was required to pay as it waived right not to pay by not contacting beneficiary and address the discrepancy issue in 7 banking days as required by UCP..........................................82Dixon Irmaos & CIA v. Chase National Bank ( 2 nd Cir 1944). Bank should be aware of well- known and standard practices of other banks. B submitted a letter of guaranty from a NY bank to Chase in place of BoL which was being mailed. Bank refused to issue saying that it was a nonconformity. Ct said that custom under consideration explains the meaning of the technical phrase and is incorporated by implication into the terms of LC. Purpose of this custom is to allow the expeditious handling of business. Unless an indemnity can be substituted, quick clearance of these transactions don ’ t happen, lose purpose of transactions. ..............................................82

Banco Esponol de Credito v. State Street Bank and Trust Co . (1 st 1967). Strict compliance doesn ’ t mean slavish compliance. Go figure this out. .................................................................83Independence Principle...............................................................................................................83UCP – is not governing law unless incorporated into the LC. .......................................................83Fraud.......................................................................................................................................... 83

UCP has no provisions on fraud, ie that it is silent on the issue...............................................83Fraud in UCC § 5-109...............................................................................................................83

- A holder in due course (HDC) one who takes commercial paper w/o prior knowledge of fraud for good consideration. If the bank doesn ’ t detect it, it will accept it. If it does detect fraud, it must honor LoC even if it forged....................................................................................83- Not all HDCs are included if HDC voluntarily chose to deal with Seller (wrongdoer)............83If you buy the L/C from seller and you don ’ t know that there was fraud involved. You are not protected as a holder in due course if you buy it from the seller, the wrongdoer........................83If you buy it from another party – if brought into the transaction by some other party – such as the bank, the applicant – not in direct contact with the wrongdoer – then you are protected. . . . .83Bank may honor LoC even if the Bank has been notified by another party of fraud. So long as it acts in good faith, it will be ok.....................................................................................................83Sztejn v. J. Henry Schroder Banking Co (NY Sup Ct 1941) ....................................................83

R1: When the seller ’ s fraud has been called to bank ’ s attention before the drafts and documents have been presented for payment, the principle of the independence of the bank ’ s obligation under the letter of credit should not be extended to protect the unscrupulous seller................................................................................................................................................. 83R2: When the issuing bank has already paid the draft before receiving notice of the seller ’ s fraud, it will be protected if it exercised reasonable diligence before making such payment...83R3: Even if the documents are correct, but in fact false or illegal, the bank cannot be called upon to recognize such a document as complying with the terms of a letter of credit............83Rule policy: not to protect the unscrupulous party. Allows the bank to go behind the documents in instance of fraud so as to protect the innocent parties......................................83

Comment: the fraud exception here is narrow – applies to cases before payment is made and no innocent third party involved. In this instant case – there was fraud in the transaction. The documents were used to perpetuate the fraud. And that the documents were forged..........................................................................................................................83

Pre-litigation game......................................................................................................................83What if B goes to court and fails to get the injunction? What is B ’ s next likely move? ............83 If sue bank........................................................................................................................83o B-App must show that Bank did not discharge its duty in good faith................................83 This is very hard...............................................................................................................83 If sue seller.......................................................................................................................83o Show fraud in the underlying transaction – which would be easier than showing that bank did not discharge duty.............................................................................................................83

Enjoining payment under the LoC.........................................................................................83must show material fraud........................................................................................................83that there is not alternative to an equitable remedy ie the injunction.....................................83Equity is justice........................................................................................................................83

Mid-America Tire, Inc v. PTZ Trading Ltd.............................................................................83Rule: When a letter of credit expressly incorporate the terms of the UCP, but the UCP does not contain any rule covering the issue in controversy, the UCP does not prevent relief and other law relevant to the controversy may govern..................................................................83Vitiation exception: Material fraud is fraud that so vitiates the entire transaction that the legitimate purposes of the independence of the issuer ’ s obligation can no longer be served. 83- The court finds that the scope of UCP is different than that of the UCC. UCP covers areas that are not covered by UCC (ohio law incorporated relevant section of UCC). Each will govern in its area of coverage, and both will apply concurrently in the event of any overlapping consistent provisions. UCP ’ s silence on the issue of fraud should not be construed as preventing relief. Article 5 can fill gap....................................................................................83- UCC incorporates rule of Sztejn. Applicant BoP: that the L/C was being sued by the beneficiary as a vehicle for fraud, or that the beneficiary ’ s conduct, if rewardedby payment would deprive the applicant of any benefit of the underlying contract and transform L/C into a

means for perpetrating fraud...................................................................................................84- PTZ ’ s actions constitute material fraud – statements and facts were so misrepresented and that L/C was being used as a vehicle for fraud..................................................................84

Technology Transfers..................................................................................................................84See outline................................................................................................................................84Handout #1 Counterfeiting and Infringment.......................................................................84IBT Continuum: Sales Licensing FDI ....................................................................................84

Sales: the most remote type of contact...................................................................................84Licensing: it ’ s not a tangible good anymore, it ’ s intangible – use of IP property – you let go some of the control you have over the product.......................................................................84FDI: Foreign Direct investment – appropriation, takings, litigation that arises. ........................84

Who Owns IPRs............................................................................................................................84 What are Intellectual Property Rights: rights over information, processes, sometimes tangible goods that incorporate technologies..........................................................................84 Who owns IPR? MNE, large corporations..........................................................................84 incentive to create...........................................................................................................84 They license because they want to profit from their rights. Collection of royalties – expand the usage of their technology in other countries – develop reliance on their products.

84 Licensees seek licenses because they don ’ t want to pay the research costs, to acquire knowledge to technologies......................................................................................................84 The restrictions are anticompetitive in that it creates a monopoly, based on the incentive policy to create, to advance science and technology...............................................................84

N-S Debate..................................................................................................................................84 North wants exclusivity....................................................................................................84 South – want technology to make technological leaps .....................................................84 Was the WTO TRIPS Agreement a “victory” of the North..................................................84o Was a victory for N because it protects the rights of industrialized nations......................84 We had to pay a price to get it. The new industries are protected. The old industries are not. Sell off old industries, ie steel industry. Then get services and distribution of goods and services easier in other countries............................................................................................84 Agriculture was protected in US.......................................................................................84 Did we get what we bargained for in TRIPS?....................................................................84 The most effected people are the ones in the North – you could make a lot of copies, now you can ’ t. [but the corps get the benefits – not the south – and the corps are located in the north]....................................................................................................................................... 84

Intl IPR framework and a look at Brazil and China.............................................................84Country Issues – Brazil .............................................................................................................84China – PRC ..............................................................................................................................84

Domestic Remedies for foreign origin IPR violations....................................................................84U.S. Remedies.............................................................................................................................84

ITC § 337 Proceedings......................................................................................................84o reach grey market goods,.................................................................................................84o unfair import practices before the ITC..............................................................................84 The problem with proceedings in rem if IIPR violation is claimed.....................................84

Handout #2 - § 337 complaints..............................................................................................84Section 337 of the Tariff Act of 1930 allows complainants to file suit on unfair import methods or acts. Have duty of candor...................................................................................................84- Duty of Candor is violated by 1) a failure to disclose material information or false material ahs been submitted and 2) intent to mislead..........................................................................84Administrative Process.............................................................................................................84- § 337 governed by Administrative procedure Act ∴ FRPC apply. .......................................84

General Exclusion and Cease and Desist Orders:.................................................................84N-S Debate................................................................................................................................84

Biopiracy: LDC claim to be owners of knowledge and biological resources and accuse MNEs and developed countries of theft. This turns patent on its head, it protects commonly shared knowledge and traditions of a community – turn it into private property to be financially exploited by only a few............................................................................................................84

Foreign Direct Investment..........................................................................................................85FDI – the most direct way to be involved in a country .............................................................85Investors from A will invest in country B – land, assets, etc. ....................................................85B may expropriate investor ’ s investment. ...............................................................................85

ICJ Expropriation Cases................................................................................................................85ICJ Statutes..................................................................................................................................85Anglo-Iranian Case (1952 ICJ Rep 93)...................................................................................85Barcelona Traction Case..........................................................................................................85Elsi Case.................................................................................................................................... 85ICSID Arbitration & Procedural Issues: International Center for Settlement of Investment Disputes...............................................................................................................85

Need:.......................................................................................................................................85Standing: must be a country................................................................................................85Consent to be there.............................................................................................................85A live dispute.......................................................................................................................85Over investment..................................................................................................................85Home country of investor and host state must be parties to ICSID Convention...................85

Lanco Intl v. Argentine Republic...............................................................................................85Wena Hotels v. Arab Republic of Egypt....................................................................................85

Egypt violated fair and equitable treatment and expriopriation of the stuff.........................85Nafta Investment Chapter and Arbitration...............................................................................85

Proscribed Conduct in International Business: Bribery.........................................................85FCPA........................................................................................................................................... 85

contains broad jurisdictional nexus..................................................................................85 Some exceptions to FCPA.................................................................................................85o The grease money: so long as targeted government action is routine, not linked to influencing foreign official ’ s decision to grant or maintain government business ....................85o Affirmative Defenses:.......................................................................................................85

UN Convention against Corruption..............................................................................................85 proscribes commercial bribery, trading in influence, and “laundering” of the proceeds of corruption................................................................................................................................85 this includes private not just officials...............................................................................85 Therefore the reach is broader.........................................................................................85 Now in force (Dec 2005) & US is signatory.......................................................................85 Provides for mechanism to recover bribery-related funds and assets..............................85 Focuses on “undue advantage” rather than payments (ie broader).................................85

US v. King (8 th 2003) ................................................................................................................85Holding : The court held there was ample evidence in the record to support the convictions and that the government ’ s conduct was not sufficiently overreaching or outrageous. ............85Rule : To prove conspiracy, government BoP to show there was an agreement between at least two people who had the objective to violate the law. Proof of a formal agreement is unnecessary. A tacit understanding is sufficient and can be proved by direct or circumstantial evidence..................................................................................................................................85Rule 2 : FCPA prohibits the use of any means or instrumentality of intestate commerce corruptly in furtherance of an offer, payment, promise to pay, or authorization of payment of money, or an offer, gift, promise to vie or authorization of the giving of anything of value to a foreign official for the purposes of influencing any act or decision of such foreign official in his official capacity........................................................................................................................85Issue 2 : whether the government ’ s actions could be considered overreaching and outrageous...............................................................................................................................85Rule: the actions must be conscience-shocking behavior to be considered overreaching and outrageous, and therefore inadmissible. Such actions may consist of actions that induce contrived evidence or involve trickery......................................................................................85

U.S. v. Kay (5 th 2004) ...............................................................................................................85Rule: FCPA criminalizes the payment to foreign officials that are intended to 1) influence a foreign official to act or make a decision in his official capacity or 2) induce such an official to perform or refrain from performance some act in violation of official duty, or 3) secure some wrongful advantage to the payor with the intent to assist, or intended to assist, the payor in

efforts to obtain or retain business. There has to a sufficient connection between the payment and the business nexus element in order for an action to be reached by the FCPA.................86Exception : grease money or facilitating payments were excluded. Distinction between corrupt and non-corrupt grease money is that prohibited payments induce officials to act corruptly, misuse official position and discretionary authority, grease money payments are toward those actions that are ministerial in nature and intended to move a particular matter toward an eventual act or decision which does not involve discretionary action.....................86Affirmative defense : that the payments were legal in that country or constitute bona fide expenditures related to promotion of products or services, or to the execution or performance of a contract with a foreign government or agency..................................................................86

Foundation of the Shareholder ’ s Committee Rep. Former Shareholders of Saybold Intl, v. Schrieber (2 nd 2003) ..............................................................................................................86

Rule : FCPA 78dd-1, 78dd2 prohibit: .........................................................................................861) issuers, domestic concerns, and any person 2) from making use of interstate commerce 3) corruptly 40 in furtherance of an offer or payment of anything of value 5) to a foreign official, foreign political party or candidate 6) for the purpose of influencing any act of that foreign official in violation of the duty of that official or to secure any improper advantage in order to obtain or retain business.........................................................................................................86It is not an element of the crime to be aware that it is violating a crime under the FCPA........86Corruptly is defined in the Senate report as connoting an evil purpose or motive, an intent to wrongfully influence the recipient. A fundamental component of a corrupt act is a breach of some official duty owed to the government or to the public at large. There is nothing in the word that indicates government must establish D in fact knew that conduct violated the FCPA to be guilty of such a violation. Specific intent to violate the FCPA is not an element of FCPA violation...................................................................................................................................86

Anticompetitive Behavior and an Introduction to Extraterritoriality:................................................86Extraterritorial judicial jurisdiction: involving parties not in the jurisdiction and will suffer from decision abroad...........................................................................................................................86Violations of anti – trust ...............................................................................................................86EU Blocking Statutes...................................................................................................................86

End of Comity?.........................................................................................................................86 clawback provision...........................................................................................................86 good faith attempt to work around blockade – business is put in a bad situation. ............86 Comity: we enforce other country ’ s judgments. ...............................................................86

Prohibited Activities.....................................................................................................................86Prohibited behaviors....................................................................................................................86

International Arbitration & Litigation.......................................................................................86M/S Bremen v. Zapata (USC 1972) (choice of Forum Case) .....................................................86

Rule: Old traditional rule has changed. Original rule under Carbon Black – that such clauses are not enforceable because of object of such a clause is to oust jurisdiction of courts and therefore contrary to public policy...........................................................................................86Normal forum non conveniens doctrine in the absence of a clause: unless the balance is strongly in favor of the defendant, the P ’ s choice of forum should rarely be disturbed. ..........86However, in cases of international transactions, Carbon Black does not apply. Policy behind this is that it does not encourage commerce if we govern all contracts by US laws and make parties resolve them in US courts. Old doctrine is provincial..................................................86rule for intl contracts and cases in admiralty: if there is a forum selection clause, such clauses are prima facia valid and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstances...................................................86When the clause should be set aside: strong showing of fraud, would be unjust, overreaching, clause is produced by overweening bargaining power.............................................................86

McDonnell Douglas v. Iran (8 th 1985): a forum selection clause was held unenforceable because there were compelling and countervailing reasons: litigation in the courts of Iran would have been so difficult that the corporation would have been deprived of its day in court as no dip. relations, Iran/Iraq war, and travel to Iran difficult. In addition, the forum clause used the preferential word "should" as opposed to mandatory language such as "shall" or "must.".........86Paper Express v. Pfankuch (7 th Cir 1992) : enforced clause even though the clause was in fine print and in German. The court said that basic theory of contract: person who signs contract is

bound by the terms. To do so w/o knowledge of what one is signing is doing it at one ’ s peril. ...87Carnival Cruise : 1991 USC upheld clause printed on the back of a boat ticket. .......................87Vimar v. Sky Reefer: 1992 – USC upheld clause on a bill of lading. ........................................87Amco Ukrservice v. American Meter (Pt. II) 2004 ..................................................................87

Facts: see Pt 1. Choice of forum not selected.........................................................................87Issue: Whether to apply PA law or Ukrainian law.....................................................................87Rule: PA choice of law rule: hybrid of significant relationships and interest analysis...............87

Significant contacts: needs of interstate and international systems, relevant policies of the forum, policies of the interested nations, expectations of the parties, basic policies of the SM, certainty, predictability, and uniformity of the result, ease of applying the law.............87Interest analysis: 1) true conflict: court will apply the law of the forum with the greatest interest in the dispute, 2) apparent conflict: court may be able to resolve it by interpretation, 3) false conflict: only one state has an actual, legitimate interest................87

Problem 8-4...............................................................................................................................87The relevant question is whether risk of loss is controlled by mandatory law – the law agreed to in the agreement. French law says that Ohio shall bear it. Whether French law applies as the law chosen by the parties will depend on whether the issue is controlled by mandatory law. Choice of law clause will apply if mandatory law does not..........................................................87Mandatory law: a matter of public law. Party cannot freely dispose of mandatory law in civil law countries..................................................................................................................................... 87Is risk of loss controlled by mandatory law? Public law that cannot be waived by the parties. No. Risk of loss is not. Therefore French law will apply......................................................................87Problem 8-3...............................................................................................................................87

2 nd Cir decided that the general rule is when general jurisdiction is not made exclusive, it does not prohibit adjudication in other courts. Here, the language says that all disputes shall come within the jurisdiction of the Italian courts. To solve this problem, would have had ot put in “exclusive” jurisdiction of the Italian court..............................................................................87

ARBITRATION................................................................................................................................87 New York Convention on foreign arbitral awards. The relevant national law that gives arbitration its binding character is the Federal Arbitration Act of 1994 – 9 USC § § 1-307 ........87 Strong federal policy to support arbitration......................................................................87 Forum/choice of law clause in agreement between parties is an almost indispensable precondition for the orderliness and predictability essential to any international business transaction. Scherk v. Alberto-Culver (US 1974) It also included security isseus – mandatory law. Policy reason: to foster business by providing orderliness and predictability in contract...................................................................................................................................87 Antitrust laws may be arbitrated as agreed by the parties. No presumptive exclusion. Mitsubishi case........................................................................................................................87 COGSA dispute goes to arbitration so long as liability is not lessened. Sky Reefer Case. They can choose the means of enforcing that liability is subject to party agreement so long as liability is not lessened............................................................................................................87 US courts have adopted a strong non-parochial, comity-based & pro-arbitration policy. .87o UK are strong arbitration, but not as strong as ours.........................................................87o Arbitration clause upheld even when arbitration panels are to decide on matters controlled by mandatory law....................................................................................................87

Mitsubishi Motors Corp v. Soler Chrysler Plymouth Inc (USC 1985) ..................................87Rule 1: Threshold: If the parties agreed to arbitrate that dispute and barring evidence of fraud, overwhelming one-sided economic power or other legal constraints that would provide grounds to set aside the contract, the conflict will be arbitrated. Public policy favors arbitration ∵ of its usefulness in international trade. .................................................................................87Rule 2: So long as the prospective litigant may vindicate its statutory cause of action in the arbitral forum, the statue will continue to serve both its remedial and deterrent function. The tribunal is bound to arbitrate a claim, if it has its basis in a public law, in accordance with that public law. There is no presumption against arbitration of statutory claims. There may be some bars to arbitration, such as potential complexity of the problem, lack of competent and impartial arbitrators, and lack of American Safety doctrine importance of private damages remedy..................................................................................................................................... 87Reasoning: To issue 1, found that There is a strong favorability to arbitration. Moses H Cone

Memorial Hospital. they had made an agreement to arbitrate and barring legal constraints external to the agreement, it would be upheld........................................................................88Those things that are legal constraints: fraud, overweening bargaining power, contract of adhesion..................................................................................................................................88To issue 2: the court found that the litigant could vindicate its cause of action through arbitration. The court found there was no warrant in the Arbitration Act for a presumption against arbitration of statutory claims.....................................................................................88

Problem is that the arbitration may not apply the law correctly. The USC says that the US courts will have a “second look” approach and doublecheck the work of the arbitrators. Howeve,r there is no guarantee that the arbitration award will be enforced in the US................................88There are 5 grounds to refuse enforcement of an award:............................................................88

1. incapacity of one of the parties or the agreement to arbitrate is not valid under the law 882. if the party was not given proper notice...........................................................................883. the award deals with a difference not contemplated or falls within the terms of the arbitration agreement..............................................................................................................884. the arbitration took place was not accordance with the agreement.................................885. the award has not yet become binding on the parties or has been set aside by a competent authority of the country in which that award was made. Meaning there is a law or a public policy that will let them set aside the award..............................................................88

Polytek Engineering Co v. Jacobson Co. (MN 1997) ............................................................88Rule: to decide whether to confirm an award must have:........................................................88

1) an agreement in writing to arbitrate the subject of the dispute...................................882) arbitration in the territory of a signatory of the Convention.........................................883) agreement must arise out of a legal relationship whether contractual or not, which is commercial in nature...........................................................................................................884) One of the parties cannot be an amcit, or the commercial relationship must have some reasonable relation with one or more foreign states............................................................88

Reasoning: slam dunk on 2-4. Real question whether there was a writing. Court said yes ∵ D ’ s conduct deemed acceptance of the terms and conditions of the underlying hebei contract. IE waiting until hebei contract was complete, saying that waiting for PO w/ “official contract” attached. Etc. Since the Hebei contract contained an arbitration clause, therefore the clause applies. The court recognized the arbitration award and enforced it......................................88The reason for having a writing is the FAA – the implementing statute of the convention. ......88

Glencore Grain v. Shivnath Rai Harnarain (9 th 2002) ...........................................................88Issue: Whether a US court could enforce an arbitration award when there is absence of personal jurisdiction over the party..........................................................................................88Holding: No..............................................................................................................................88Rule: Arbitration does not and the Convention does not abrogate due process requirement of jurisdiction of the courts must exist over the defendant ’ s person or property. ........................88

To make determination whether there is PJ:.................................................................................88 national aggregated contacts...........................................................................................88 14 th amendment minimum contacts – must be state contacts .........................................88 Unreasonableness............................................................................................................88

The question was process achieved over shivnath? Process was effected by state process, so must analysis under 14 th amendment prong. If by federal process, go to 5 th amendment prong. .................................................................................................................................................... 88

Jurisdiction.................................................................................................................................... 88Ask yourself threshold question: jurisdiction, forum and venue...................................................88

Jurisdiction to prescribe: contains legislative jurisdiction.................................................88o Comes from legislation.................................................................................................88

The other type, judicial jurisdiction: SM............................................................................88o Territorial......................................................................................................................88o Subject matter jurisdiction............................................................................................88

Territorial..........................................................................................................................88o Conduct within a territory of a nation...........................................................................88o Status of persons or interests located within territory..................................................88

Extraterritoriality..............................................................................................................88o Nationality principle : extraterritorial conduct of nationals .......................................88

o Protective principle : extraterritorial conduct of any party that is directed against state secrecy or certain other interests. Ie if you do something that threatens US national interests. That is the type of conduct the protective principle encompasses. There is also a rule of reason – a state may not exercise prescriptive jurisdiction when the exercise would be unreasonable..................................................................................................................89 Effects Doctrine : exterritorial conduct by any party that has 1) actual and substantial effect within the territoriy or 2) is intended to have a substantial effect within the territory89

Judicial Jurisdiction: Territorial Jurisdiction....................................................................................89 TJ demarcates the reach of adjudicatory power of courts over civil cases within a sovergieng ’ s territory so long as such exercise of authority would not be unfair or unreasonable...........................................................................................................................89 Courts determine GJ in a diversity case:...........................................................................89

o State minimum contacts + unreasonableness test.......................................................89 Essentially Intl Shoe and WW VW and Asahi.................................................................89

o State Process: 14 th amendment analysis ..........................................................................89If process served by 5 th amendment – then you look at contacts in a different way ................89

You look to the nationally aggregated contacts – you look where court is. You have to ask if the long arm statute applies and if it is constitutional.........................................................89The federal service of process – has to be gauged by 5 th amendment test ..........................89Views the territory as having no states, just one big state...................................................89You look at the national aggregate of contacts over the whole of that one state.................89And then you look at the unreasonableness test.................................................................89

Unreasonableness Test:...........................................................................................................89whether the exercise of jurisdiction offends traditional notions of fair play..........................891. relatedness of claim to contact. Claim asserted arises from contacts.........................892. systematic and continuous activity in the state............................................................893. convenience to D – must put at severe disadvantage ..................................................894. forum state ’ s interest – state had legit interest in redressing grievances of residents . 895. P ’ s interest in obtaining convenient and effective relief ...............................................896. interstate judicial system ’ s interest in obtaining the most efficient resolution .............897. shared interest of the states in furthering fundamental policies...................................89

Asahi Metal Industry v. Superior Court US 1987 ..................................................................89Rule: In order for a court to have jurisdiction over a foreign defendant, which did not have any connection to the forum state other than the product:............................................................891. the defendant must have purposefully established minimum contacts in the forum state. ................................................................................................................................................ 892. The contacts must proximately result from actions by the defendant himself (minimum contacts) that create a substantial connection with the forum state.......................................893. A defendant must purposefully avail itself of the privilege of conducting activities within the forum state. A consumer ’ s unilateral action of bringing the defendant ’ s product into the forum state was not a sufficient constitutional basis for personal jurisdiction over the defendant................................................................................................................................894. Foreseeability that the product may end up in the forum state is insufficient to establish jurisdiction. Reasoning for this: due process forbid a state court to exercise personal jurisdiction over a foreign defendant that would offend traditional notions of fair play and substantial justice....................................................................................................................89

Sovereign Immunity....................................................................................................................89Sovereign is immune from jurisdiction unless an exception to immunity found in FSIA, 1604 , 1605 – 07 .....................................................................................................................................891604: Subject to existing international agreements to which the United States is a party at the time of enactment of this Act a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607 of this chapter........................................................................................................................................ 89Exceptions:..................................................................................................................................89

1605: 1) waiver of immunity....................................................................................................892) action is based upon a commercial activity carried on in the United States by the foreign state........................................................................................................................................ 893) any property exchanged for such property is present in the United States in connection with

a commercial activity carried on in the United States by the foreign state..............................901606: the foreign state shall be liable in the same manner and to the same extent as a private individual under like circumstances; but a foreign state except for an agency or instrumentality thereof shall not be liable for punitive damages.............................................901607: In any action brought by a foreign state, or in which a foreign state intervenes, in a court of the United States or of a State, the foreign state shall not be accorded immunity with respect to any counterclaim, (a) for which a foreign state would not be entitled to immunity under section 1605 of this chapter had such claim been brought in a separate action against the foreign state; or.................................................................................................................90(b) arising out of the transaction or occurrence that is the subject matter of the claim of the foreign state; or.......................................................................................................................90(c) to the extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the foreign state..............................................................................90

The Act of State Doctrine.......................................................................................................90Act of State is a separate defense. Handout 4........................................................................90It ’ s a doctrine of abstention: judicially created doctrine of deference to acts of a foreign sovereign where the exercise of jurisdiction would otherwise be proper..................................90The forum has subject-matter jurisdiction it just chooses not to exercise jurisdiction over a particular claim........................................................................................................................90The doctrine rests upon considerations of international comity, separation of powers, and intended to avoid embarrassment or to injure foreign relations..............................................90Sometimes courts will receive advise from state dept if it would injure relations. Silence does not mean that it would be injurious to foreign policy...............................................................90Optopics Labs v. Savannah Bank of Nigeria (SDNY 1993) ................................................90

The act of state in optopics was the Nigerian exchange controls = the Nigerian central bank refused to issue American dollars to pay for the letter of credit...........................................90Act of state doctrine is that a US court will not adjudicate matters laws of nations as applied within their own borders are soverign and should not be passed upon by our courts and 2) judiciary should be restrained from rendering decisions that affect US foreign policy, a sphere of power assigned to exec and legislative................................................................90It requires a court refrain from adjudicating the legality of a sovereign act of a foreign state............................................................................................................................................. 90The threshold is that the act must take effect entirely within the boundaries of a sovereign nation. When it is outside sov territory, courts must decide whether to give extraterritorial effect to the foreign law, based on comity, only if it does not conflict with the laws and policies of the US.................................................................................................................90This rule is to be applied thinking about foreign policy implications and applied flexibly on a case by case basis...............................................................................................................90R2: In cases of debts that banks owned by sovereigns owe to our nationals, applicability of doctrine depends on the situs of the debt, where the right to receive repayment from banks in accordance with the loan agreements. If it is to take place in the sov country, act of state doctrine prohibits adjudication. If it takes place in US, courts must consider whether to apply the doctrine if it is consistent with laws and policies of the US...................................90

Braka v. Bancomber (2 nd Cir 1985) – the entire act was perfected within the territory of Mexico. The situs of the debt was located in Mexico. The purchase was made in Mexico, and that the principal and interest would be paid in Mexico from a Mexican bank. This is a case for situs within territory.................................................................................................................90Allied Bank v. Banco Credito Agricola (2 nd Cir 1985): said that the situs of the debt not entirely within Costa Rica. The court said that Costa Rica ’ s interest in this was limited to the extendt it could unilaterally alter the payment terms. Said that this was not sufficient reason to locate debt entirely in Costa Rica and apply the state act doctrine. Therefore, would have to question whether or not to give extraterritorial effect to Costa Rican law. They said no. Second part of the analsysi......................................................................................................90Garcia v. Chase Manhatten Bank (2 nd Cir): doctrine was inapplicable ∵ the situs of debt was wherever it could be collected.................................................................................................90If the Nigerian government ’ s action were not against US public policy, then court would abstain from exercising SMJ out of comity................................................................................90Fogade v. ENB Revocable Trust (11 th 2001) .......................................................................90

Rule: Hickenlooper Amendment ’ s allows judicial review in the following circumstance (3 requirements):.....................................................................................................................91

1) claim of title or other right to property,........................................................................912) based on or traced through a confiscation or other taking...........................................913) in violation of international law....................................................................................91A confiscation usually involves misappropriation by foreign govts of property that belongs to cits not of that country.................................................................................................91

When a country takes property entirely owned by its own nationals, it does not violate international law...................................................................................................................91The circumstance where amendment applies: federal court must not decline on act of state grounds to address the merits in a case when a party asserts a claim of right based upon a confiscation or other taking by an act of state in violation of the principles of international law. The taking must be based upon and derivative of an act of state that is in violation of international law...................................................................................................................91

Act of State limitations:...........................................................................................................91W.S. Kirkpatrick v. Environmental Tectonics Corp.................................................................91

SCt refused to apply the act of state doctrine because it did not involve an inquiry into the lawfulness of an act of a foreign sovereign, but merely to consider the motivations of foreign officials.................................................................................................................91

Int'l Comity & Forum Non Conveniens (FNC):..........................................................................91DeYoung v. Beddome (SDNY 1989) ..........................................................................................91

Rule: Doctrine of international comity (Hilton v. Guyot):..........................................................91Federal courts are to recognize the laws and judicial acts of another nation with due regard to both international duty and convenience , and to the rights of its own citizens , or of other persons who are under the protection of its laws . Essential for the foreign decision not to offend laws or public policy of the forum jurisdiction or violate the rights of its citizens . ............................................................................................................91Federal courts may look at a case where federally protected rights may not be protected by a foreign court. It is not pertinent if the law is merely less advantageous to the plaintiff..........91Comity issues are not the same as issue preclusion................................................................91FNC Analysis:...........................................................................................................................911. is there an available alternate forum:? YOU MUST DO THIS.............................................912. If Yes, balancing among....................................................................................................91a. Private interests...............................................................................................................91

i. where the litigants are located,....................................................................................91ii. where the witnesses and evidence located..................................................................91iii. private interests of the litigants....................................................................................91

1. P ’ s choice of forum weighs less heavily in a representative case or derivative case: only a small direct interest in a large controversy that may have many potential plaintiffs in many potential jurisdictions (like class actions)............................................................912. Ps in such a case only own an interest in the controversy and desire to represent others similarly situated...................................................................................................91

b. Public interests.................................................................................................................91i. public interest of having adjudication where the critical events took place..................91ii. burdens on the foreign court system (SDNY courts are over burdened).......................91iii. what choice of law would apply – would have been Canadian law anyway. ..................91iv. local interest - localized controversies decided at home...........................................91v. interest in having the trial in a forum that is at home (familiar) with the law that must govern the action,................................................................................................................91vi. avoiding unnecessary problems in conflict of laws or in the application of foreign laws, 91vii. interest in not burdening citizens in an unrelated forum with jury duty....................91

c. If No available alternative forum, court will decide to adjudicate.....................................91d. If they are foreigners , an alternative, adequate forum? That is all you look at. ...........913. Courts give weight to P ’ s choice of forum so long as basic things are met, notice, forum, venue, etc................................................................................................................................914. Foreign Ps do not get a lot of deference. Piper case. The courts don ’ t apply the same decision making in case of foreign plaintiffs. Ie so must ask if they are foreign or domestic

plaintiffs...................................................................................................................................92Opinion structured on FNC argument, but used comity as the reason to dismiss....92

Comity – based on Hilton v. Guyot. ..............................................................................................92international comity is more than recognition and enforcement..............................................92No comity is owed when a foreign government action or foreign court decision contradict US foreign policy............................................................................................................................92If it doesn ’ t contradict US public policy, then courts may decline to exercise of jurisdiction for comity reasons........................................................................................................................92

FNC Case..................................................................................................................................... 92In re Union Carbide Corp. Gas Plant Disaster at Bhopal (2 nd Cir 1987) .....................................92

- SDNY dismissed ∵ of FNC. .............................................................................................92It is not a relevant factor whether the foreign law is less favorable. ................................92Piper: disinclined to examine US vs. foreign law and both systems advantages and disadvantages. A change in law, even if it would be unfavorable, is not a relevant factor.. 92Court of Appeals: it deleted two of the conditions and upheld the decision to dismiss on FNC............................................................................................................................................ 92

Due process condition: said that it was ambiguous and might appear that the “minimal” requirement might indicate it is a lesser due process standard.......................................92In cases where there is a transfer between forums (for convenience), then you apply F1 law. You just transferred the location...............................................................................92

Deleted discovery standard under US standards.................................................................92UCIL and UCC – only the US defendant opened to US discovery. So it would apply unequal discovery standards to both defendants. Must be equal treatment.................................92The only way to get the Indian defendant – would have to get their consent to US discovery process.............................................................................................................92

o Effect of Dismissal on FNC Grounds:.............................................................................92It does not deprive an American court of jurisdiction to hear the dismissed cases in the future...............................................................................................................................92If UCC didn ’ t comply with the order, the US court can apply sanctions. ...........................92If the court dismissed the case on condition, or for FNC, the court..................................92If D doesn ’ t comply w/ conditions of the dismissal – P can snitch and court can impose sanctions, rehear the case, make it bad for D..................................................................92

Foreign Judgments in American courts.....................................................................................92Case is litigated and there is a foreign judgment.................................................................92Will come to US courts to enforce the judgement................................................................92What law applies to enforce? Notions of comity allow the judgement to have force within US territory...........................................................................................................................92The court will apply a full faith and credit analysis whether to enforce judgment................92

(SMJ) Whether jurisdiction existed by foreign court over prior case.................................92Due Process: did the proceedings comply with substantive and procedural due process.92Substantive: territorial jurisdiction...................................................................................92Procedural: notice and opportunity to be heard...............................................................92Is the judgment contrary to local public policy.................................................................92Whether rendering court ’ s legal systems affords US judgments reciprocal treatment .....92

Jurisdiction over Parent and Affiliated Companies:................................................................92Factors Supporting US Courts obtaining jurisdiction over a Foreign Parent Company..................92

a high level of control and involvement in the US subsidiary ’ s daily operations ......................92they share common officers and other key personnel.............................................................92subsidiary is marketing conduct through which a significant portion of parent ’ s sales in US occur........................................................................................................................................ 92parent uses the subsidiary to perform activities that it would normally perform itself.............92Public and marketing materials do not show a distinction between parent and subsidiary......92Failure to observe corporate and legal formalities of the distinction between parent and subsidiary................................................................................................................................92common and related involvement of the challenged conduct..................................................92

Itel Containers v. Atlanttrafik Express Service Ltd. (2 nd 1990) ..........................................92Issue: Whether SCL should be liable under one of the 3 arguments,.......................................921) is a joint partner,.................................................................................................................92

2) subsidiary was an agent, therefore holding the parent company liable, or..........................933) the abuse of the corporate form justifies piercing the corporation veil................................93Rule1: A joint venture is a partnership for a limited purpose and the legal consequences of a joint venture are equivalent to those of a partnership. One partner will be liable for the other ’ s actions. ........................................................................................................................93To form a joint venture there must be 5 elements. All elements must be present before joint venture liability may be imposed.............................................................................................93

1) two or more person must enter into a specific agreement to carry one an enterprise for profit,................................................................................................................................... 932) agreement must evidence intent to be joint venturers, ................................................933) each must make a contribution to the joint venture in property, financings, skill, knowledge or effort,.............................................................................................................934) each must have some degree of joint control over the venture, and ..........................935) there must be a provision for the sharing of both profits and losses . Must have both to be liable...............................................................................................................93

Rule2 : Two theories on agency: ...............................................................................................93Express agency : created through written or spoken words or other conduct of the principal which, reasonably interpreted, causes agent to believe that the principal desires him to act on the principal ’ s account (act in the principals ’ shoes). An express agency is formed based on the actual interaction between principal and agent, not as perceived by any third party............................................................................................................................................. 93Implied agency : depends on the reasonable conclusion of a third party, derived from the actions of the principal , that the agent has the authority to do so from the principal. It is the conduct of the principal that must be interpreted and must cause third party to believe principal consents to agent acting on his behalf......................................................93Any third party dealing with an agent does so at own peril, and must make the necessary effort to discover the actual scope of authority. BoP on third party.....................................93

Rule3: To justify piercing the corporate veil, there must be abuse of the corporate form, specifically...............................................................................................................................93

1) the principal ’ s use of an agent was to perpetrate a fraud on the plaintiffs or ..............932) agent is used as an alter ego through domination and disregard of the corporate form. Mere use of the corporate form to avoid liability is insufficient to warrant piercing the veil.93

To avoid liability...........................................................................................................................93- observe the corporate form, allow subsidiary act as its own corporation.........................93- avoid creating an express relationship.............................................................................93- to avoid creating an implied relationship, avoid all conduct that gives perception that subsidiary is just using subsidiary as an agent........................................................................93

Jurisdiction vs. Liability................................................................................................................93in the parent/affiliate context, factors for jurisdiction and liability...........................................93

Jurisdiction: is more lenient, the threshold for liability is higher...........................................93Jurisdiction is easier to prove...............................................................................................93Liability is harder, jurisdiction is a threshold issue...............................................................93The threshold is different...............................................................................................93

Holding Corporations Liable for Torts Committed Abroad – A. The U.S. Alien Tort Statute ........................................................................................................................................................ 93

28 USC § 1350.............................................................................................................................93The 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 or a treaty of the United States..........................93

Sosa v. Alvarez-Machain, 542 US 692 (2004) USC court decision on the Alien Tort Statute.........93The USC said that it was a jurisdictional statute only. That is what the USC holds. (opens the doors to courts).......................................................................................................................93It does not provide a cause of action, only jurisdiction............................................................93- The ATS does not create a cause of action, it only creates jurisdiction.............................93

- Violations of law of nations during 18 th Century Paradigm ...................................................93Violations of safe conduct (passports – pass through a sov terriroty w/o molestation) ............93Infringement of ambassador rights..........................................................................................93Piracy....................................................................................................................................... 93

- Present definition of : tort committed in violation of the law of nations...............................93

Piracy – now includes hijacking ................................................................................................94Torture – filartiga – now internationally recognized as a binding international law ...................94Kadic – Genocide and extrajudicial killings ...............................................................................94Genocide, crimes against.........................................................................................................94Doe v. Islamic Salvation Front – easily cognizable international crimes. They are federal law by virtue of supreme law..............................................................................................................94Slavery..................................................................................................................................... 94Binding international law = law of nations...............................................................................94- ATS does not limit who can be sued. – D does not have to be an American .....................94

immunities to ATS........................................................................................................................94o The President, vice president,..........................................................................................94

Beanal v. Free Port-McMoran Inc (1999)..............................................................................94Rule: § 1350 confers subject matter jurisdiction when the following conditions are met: .......94

(1) an alien sues..................................................................................................................94(2) for a tort,........................................................................................................................94(3) that was committed in violation of the law of nations or a treaty of the United States...94

Notice Requirement.................................................................................................................94FRCP 8 require more than bare bone allegations that a wrong has occurred.......................94

A law of nations: is a wrong generally recognized as an international law violation................94ATS only applies to shockingly egregious violations of universally recognized principles of international law...................................................................................................................94

Aguinda v. Texaco (2 nd 2002) ..................................................................................................94Rule: FNC considerations: 1) plaintiffs are foreigners, 2) is there Adequate alternative forum test, 3) balancing of private and public interest factors...........................................................94

Doe v. Unocal Corp . (9 th 2002) ..................................................................................................94Rule: 1) Threshold determination: is it a tort by international standards.................................94

Forced labor, rape (as a form of torture), and slavery are jus cogens violations and violations of law of nations...................................................................................................................94

2 nd determination: is it a state action. ......................................................................................94In some types of crimes, state action is not required and individual liability attaches. Slavery is one of them. Forced Labor is modern day equivalent.........................................94Rape, torture and summary execution require state action, ie state officials operating under color of law...........................................................................................................................94However, if the crime is committed in pursuit of genocide or war crimes , individual liability attaches . ..............................................................................................................94

3) To be liable for a tort under ATS, must have an actus reas and mens rea............................94Remember : have to meet threshold of Rule 8: Beanal. Have to allege enough facts to put D on notice..................................................................................................................................94

Parallel Transnational Litigation & Antisuit Injunctions:.......................................................94Responses to Parallel Foreign Litigation.......................................................................................94

dismiss in whole or in part based on comity............................................................................94stay litigation...........................................................................................................................94move forward and allow parallel litigation...............................................................................94move forward and issue anti-suit injunction............................................................................94

Finanz AG Zurich v. Banco Economico SA (2 nd 1999) ............................................................94Issue: Whether the case in NY should be dismissed.................................................................94Holding: Yes, it should be dismissed based on international comity.........................................94Rule: US courts should defer to comity unless it violates US public policy or principles of due process and fundamental fairness...........................................................................................94

Public policy concerns may involve commercial interests and ensuring liabilities are satisfied as part of its liquidation.......................................................................................................94Due process concerns in creditor situations include.............................................................94

1) treatment of creditors in same class treated equally in the distribution of assets (ie foreign vs. domestic creditors),........................................................................................942) whether liquidators are held accountable to the court,................................................943) whether creditors have the right to submit claims,......................................................944) whether liquidators are required to give notice to creditors,........................................945) if there are provisions for creditors meetings,..............................................................94

6) if domestic law favors its own citizens,........................................................................957) whether assets will be centralized and distributed.......................................................958) if there are provisions for an automatic stay and if the stay may be lifted to facilitate the centralization of claims..............................................................................................95

Goldhammer v. Dunkin Donuts, Inc (USDC MA 1999) ............................................................95Issue: Whether P ’ s motion to dismiss should be granted ........................................................95Held: No, but a stay was granted pending the outcome of the English case............................95Rule: Parallel proceedings in foreign jurisdiction will not constitute an exceptional circumstance which justifies abdication of federal jurisdiction.................................................95Courts should look at relevant factors to determine whether a stay should be granted:.........95

1) similarity of parties and issues in the foreign litigation,...................................................952) promotion of judicial efficacy,..........................................................................................953) adequacy of relief available in the alternative forum (not required in FNC),....................95

iii (11)  "#Nominated person" means a person whom the issuer (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.

##(a)  #"Acceptance" means the drawee's signed agreement to pay a draft as presented.  It must be written on the draft and may consist of the drawee's signature alone.  Acceptance may be made at any time and becomes effective when notification pursuant to instructions is given or the accepted draft is delivered for the purpose of giving rights on the acceptance to any person.

§ 5-109. Fraud and Forgery.

#(a)  If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:

(1) the issuer shall honor the presentation, if honor is demanded by (i) a nominated person who has given value in good faith and without notice of forgery or material fraud, (ii) a confirmer who has honored its confirmation in good faith, (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person, or (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and(2) the issuer, acting in good faith, may honor or dishonor the presentation in any other case.

#(b)  If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that:

(1) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer;(2) a beneficiary, issuer, or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;(3) all of the conditions to entitle a person to the relief under the law of this State have been met; and(4) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material

4) issues of fairness to and convenience of the parties, counsel, and witnesses,................965) possibility of prejudice to any of the parties,...................................................................966) temporal sequence of the filing of the actions.................................................................96

Federal courts may only dismiss or remand cases only where relief being sought is equitable or otherwise discretionary, but they may not do so in common law actions for damages..........................................................................................................................96

Anti-Suit injunction..................................................................................................................96- total end of comity............................................................................................................96- When you ask a court to enjoin the other party from initiating a suit in a foreign court.. .96- In the Laker Airways case, the British Defendants asked the English court to enjoin Plaintiff Laker from initiating suit in the United States.............................................................96- The concept has been accepted in some federal circuits.................................................96- A US judgment will not be enforced if there was an anti-suit injunction granted prior......96

French Enforcement of Foreign Judgments – See Outline .............................................................96- Exequatur: if you want to sue someone in a civil law country , you have to find a 1) nominated action to sue that person. If there is no nominated action, you cannot sue that person...................................................................................................................................... 96- French law recognizes foreign judgments of countries with which it has signed a 2) bilateral treaty or entered into a multilateral treaty also ratified by France.............96

fraud and the person demanding honor does not qualify for protection under subsection (a)(1).

iv claim preclusion. See RES JUDICATA. "[T]he principal distinction between claim preclusion and issue preclusion is ... that the former forecloses litigation of matters that have never been litigated. This makes it important to know the dimensions of the 'claim' that is foreclosed by bringing the first action, but unfortunately no precise definition is possible." Charles Alan Wright, The Law of Federal Courts § 100A, at 723 (5th ed. 1994).

"Res judicata," or "res adjudicata" in the parlance of some of the earlier decisions, is a Latin phrase which in translation within a legal context can be rendered "a matter adjudged" or "a thing adjudicated." As a judicial doctrine in Anglo-American jurisprudence, the traditional rule of res judicata holds that the judgment of a court of concurrent jurisdiction directly upon a matter is conclusive between the same parties as to that matter when drawn in question in another court. The rule rests on the ground that once a party has litigated, or has had the opportunity to litigate, the same matter in a court of competent jurisdiction, that party or its privy should not be permitted to litigate it #again to the harassment and vexation of its adversary.#[FN3] Two distinct aspects of this doctrine have developed in its decisional application. One of these aspects concerns the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand, or cause of action. The other aspect, historically specified by the term "collateral estoppel," pertains to the effect of a judgment as precluding the relitigation of particular facts or issues in another action between the same parties on a different claim or cause of action.#[FN4] In the contemporary nomenclature for these dual aspects of res judicata doctrine, as utilized in the Restatement 2d, Judgments (1980) and recent case law, the first aspect described above, with which this annotation is concerned, is designated as "claim preclusion"; the second aspect is known as "issue preclusion."#[FN5]

v Comity is a term used in international law (and in the law governing relations between U.S. states) to describe an informal principle that nations will extend certain courtesies to other nations, particularly by recognizing the validity and effect of their executive, legislative, and judicial acts. This principle is most frequently invoked by courts, which will not act in a way that demeans the jurisdiction, laws or judicial decisions of another country. Also, comity in the context of professional licensure, refers to one jurisdiction granting credit for experience earned, and exams passed, in a different jurisdiction

- For those others, judgments are enforced according to the 3) general rules elaborated by the Cour de Cassition in Munzer v. Munzer . ........................................................................97- Munzer v. Munzer: five conditions must be met: ...........................................................97

8. foreign court had jurisdiction over D.....................................................................97i. If the foreign court had SM or venue under the law where judgment was made.......97ii. if French courts had exclusive jurisdiction (under French law), then the foreign court will not have jurisdiction...................................................................................................97iii. if the foreign court had international jurisdiction, rule is:..........................................97

1. foreign court is deemed to have jurisdiction if the dispute is connected in a characterized manner to the country where the decision was made and if the choice of the court was not fraudulent........................................................................................97

9. that the procedure before that court was regular..............................................9710. that the law applicable according the French rules of conflict of laws ........9711. judgment complies with international public policy........................................9712. absence of fraud under the law..........................................................................97

Judgment is not required to be final : will be enforced in France when the judgment would be enforceable in the foreign state, even if the judgment is subject to appeal or recourse. Some bilats require that the foreign judgment be final............................................................97Will not review the case based on the merits . ................................................................97Service of Process : is only to provide notice and opportunity to hear and present defense. Will be examined to see if process conforms with public policy...............................................97Damages : French courts cannot modify or put into question the measure of damages .........97Date and rate of currency exchange : can be made at the official rate on the date of payment..................................................................................................................................97Judgment in tax matters or judgments awarding treble damages or punitive damages: these are considered private penalties, which French law only allows exact compensation for damages with some exceptions...............................................................................................97French Public Policy : procedural standards reviewed under public policy requirement and enforcement will be refused if in violation of French public policy...........................................97party ’ s testimony under oath ahs been ruled contrary to public policy. Discovery generated evidence may be contrary to public policy then......................................................................97Reciprocity: does not apply. Resolution of private disputes should not be tied to public policy. ................................................................................................................................................ 97Procedure of enforcement : judgment enforcement obtained from tribunal de grand instance. Action in exequatur is bought on residence or place where enforcement is to occur................................................................................................................................................. 97

A French court will not look at which law applies if you make a choice of law......................97States have adopted selected provisions from the Uniform Foreign Money Judgments Recognition Act, p 775 in book. .............................................................................................97How do you protect real property in France?...........................................................................97

solve it through drafting. Putting it in the contract – make the party waive right to litigate in France and to not to object to any recognition of proceedings.............................................97An attempt to circumvent mandatory law. Will not be recognized by French court.............97

US Considerations in recognizing and enforcing a foreign judgment:......................................971. whether the foreign court had jurisdiction....................................................................972. if the judgment was made with due process and fair justice........................................973. if the judgment conforms with US public policy............................................................97

a. can include comity....................................................................................................97b. Act of State Doctrine.................................................................................................97

Nippon Emo-Trans Co., Ltd v. Emo-Trans, Inc (EDNY 1990) ..................................................97Issue: Whether NET could confirm the attachment..................................................................97Holding: no, because it could not prove necessity for the attachment....................................971) Threshold consideration is whether the foreign judgment is entitled to recognition by NY courts by NY law. Must prove that the foreign court had in personam jurisdiction over the defendant in accordance with NY ’ s long arm statute ...............................................................972) Attachment may be confirmed only if there is a need to continue the attachment..........97

a. Need comes from need to secure the payment............................................................97b. Need may arise from....................................................................................................97

i. D ’ s inability to satisfy the foreign judgment .............................................................98ii. D ’ s likelihood to flee the jurisdiction .........................................................................98iii. Transfer of assets to third parties so that D would lose effective control of the funds.

98iv. Doubt on D ’ s assertions that it will pay. ................................................................98

1) NY Rule on in personam jurisdiction:................................................................................98a. foreign defendant can waive jurisdiction objections through showing up at the foreign court to argue on the merits of the case..............................................................................98b. Alternative basis for jurisdiction is based on the foreign corporation doing business within the state. Doing business includes those actions that:.............................................98

i. Fair measure of permanence and continuity allows suit on any cause of action, not merely those arising out of business transacted in the state...........................................98ii. Substantial , regular, and continuou s sales or shipment of goods in the state 981. substantial can be measured by the value of doing business transacted in the forum state, not just what portion of the total sales/shipments.......................................98iii. Agent performing work on behalf of defendant can also constitute doing business in the state...........................................................................................................................981. The work must be sufficiently important to the foreign defendant and its own officials would undertake to perform substantially similar services...............................................982. agent is acting genuinely on behalf of D and not for its own benefit........................983. Appropriate to look at nature of the business to determine whether it is acting for the benefit of D................................................................................................................98iv. Agent can include those who act more like independent contractors .............98

Reasoning: the court found that Japan had jurisdiction over ETI because it was found to do business in Japan. ETI used an agent, first EJL and then NET. The amount of business done was found to be substantial and continuous shipment of goods into the forum based on the gross value of the business transacted by ETI in Japan. The level of activity was found continuous ∵ of the relationship first with EJL and then NET over a period of years. And the activity directed at Japan was with a fair measure of permanence and continuity...................98The court found that there was insufficient need to allow the attachment. Found that ETI was likely to pay, no need to attach................................................................................................98

Evidence......................................................................................................................................98- inquisitorial system: French. judges ask questions to plaintiffs and witnesses................98- adversarial sytem: US......................................................................................................98- less than 1% of cases that are appealed are overturned. The cost of discovery, the amount of information known increases the finality of the decision........................................98- US enforces foreign judgements against its own citizens – more than any other country. 98- This is what drives............................................................................................................98