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June 25, 2014

U.S. Supreme Court Refuses to Hear Argentina’s Plea for Debt Relief

On June 16, 2014, the U.S. Supreme Court made news by declining to hear an appeal from a Second Circuit decision requiring Argentina to make payments on defaulted bonds. NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246 (2d Cir. 2012), cert. denied, 573 U.S. _____,  2014 WL 655502 (U.S. Jun. 16, 2014) (No. 13-990). The Court refused to grant Argentina’s petition for writ of certiorari, even though the nation said the rulings “could trigger a renewed economic catastrophe with severe consequences for millions of ordinary Argentine citizens.” Petition for Writ of Certiorari, Republic of Argentina v. NML Capital Ltd., No. 13-990, 2014 WL 662133 (U.S. Feb. 18, 2014).

Argentina had also filed a separate petition for writ of certiorari on a different issue arising from the same case. Petition for Writ of Certiorari, Republic of Argentina v. NML Capital, Ltd., No. 12-842, 2013 WL 122883 (U.S. Jan. 7, 2013). That other petition posed the issue of whether a plaintiff with a judgment against a foreign state could obtain discovery to uncover assets that were immune from seizure under the Foreign Sovereign Immunities Act. Id. In an opinion that was also issued on June 16, 2014, the Supreme Court held that the statute did not prohibit post-judgment discovery of immune assets. Republic of Argentina v. NML Capital, Ltd., --- S. Ct. ----, 2014 WL 2675854, at *3–7 (2014).

At issue in this matter were bonds that Argentina began issuing in 1994 and later defaulted on in 2001 as part of a debt-restructuring policy adopted in response to an economic crisis. NML, 699 F.3d at 251. In the contract under which the bonds were issued—which was governed by New York law and could be enforced in New York courts—Argentina made two promises about the 1994 bonds: (1) they would remain “unsubordinated” to other bonds the country issued, so that they “rank[ed] pari passu” (i.e., on“equal footing”) with them; and (2) they would “rank at least equally with all its other present and future unsecured and unsubordinated” bonds the country issued. Id. 

Despite these equal-treatment provisions, Argentina later demanded investors to exchange the 1994 bonds for new bonds with much lower payments. Id. at 252. To persuade investors to accept the swap, Argentina announced that it would stop all further payments on the 1994 bonds and passed legislation making the 1994 bonds unenforceable in Argentinean courts. Id. As a result of these actions, Argentina successfully restructured over 91% of the foreign debt on which it had defaulted in 2001. Id. at 253. Argentina then proceeded to make all payments due on the restructured debt but without making any payments on the 1994 bonds. Id.  

Though the 1994 bonds appeared worthless, some investors refused to swap them for new bonds, and other investors—which the Argentinean president has described as “vulture funds”—bought them at a steep discount on the secondary market, apparently in the hope of reviving their obligations through litigation. Id. at 251. In 2008, these investors brought a lawsuit in the Southern District of New York seeking to enforce the bonds’ equal-treatment provisions.  Complaint, NML Capital v. Republic of Argentina, No. 1:08-cv-06978, D.E. 1 (S.D.N.Y. Aug, 6, 2008).In 2011, the district court entered summary judgment on the investors’ claims for breach of the equal-treatment provisions and enjoined Argentina to make concurrent payments on the 1994 bonds as it made payments for bonds issued after the default. Order at p. 2, NML, No. 1:08-cv-06978, D.E. 353 (S.D.N.Y. Dec. 7, 2011). 

On appeal, the Second Circuit affirmed, interpreting the first equal-treatment provision as “prohibit[ing] Argentina, as bond issuer, from formally subordinating the [1994] bonds by issuing superior debt.” NML, 699 F.3d at 259. As for the second equal treatment provision, the court held that it “prohibits Argentina, as bond payor, from paying on other bonds without paying on the [1994] Bonds.” Id. Due to ambiguities in the lower court’s order, however, the Second Circuit directed the case to be remanded for further clarification as to the exact payments that Argentina was required to make. Id. at 264–65

In response, Argentina filed a petition for writ of certiorari to the U.S. Supreme Court, arguing that the equal-treatment provisions—which were governed by New York law—should instead be interpreted by a New York court, not federal courts, such that the issue should be certified for a decision by the New York Court of Appeals.  Petition for Writ of Certiorari at p. 17, Argentina, No. 13-990, 2014 WL 662133 (U.S. Feb. 18, 2014).  Additionally, Argentina argued that the injunction should be reversed because it was overbroad and potentially required payment with assets that were immune under a federal statute, the Foreign Sovereign Immunities Act.  Id. at p. 17–18.  However, now that the Supreme Court declined to hear these arguments, the Second Circuit’s ruling has been cemented as binding law.   

Argentina’s stock market fell sharply on news of the ruling, which has also dominated the headlines of the country’s newspapers. Some economic commentators have doubted the wisdom of the decision, at least as a matter of policy. The decision also raises concerns about the diplomatic relationship between the United States and Argentina; one commentator was quoted by Bloomberg Businessweek as saying, “it is a pretty remarkable precedent for the U.S. to allow a lower court judge to push around a sovereign nation.” Because of the Second Circuit’s remand to the district court, there is still some chance that the parties may reach a settlement that would resolve the matter.

Daniel A. Johnson, Jenner & Block LLP, Chicago, IL



December 11, 2013

Kiobel and the Exclusion of Foreign Torts

The United States Supreme Court in Morrison found that the presumption against the extraterritorial application of American law applies in the context of statutes which regulate conduct. In Morrison the legal issue was whether a foreign plaintiff can sue both foreign and U.S. defendants under § 10 (b) of the Securities Exchange Act of 1934 where the securities were traded abroad in Australia. 15 U.S.C. § 78c(a)(17).

Two months after the Supreme Court decided Morrison, the federal district court for the Southern District of New York released its opinion in Cedeño v. Intech Grp., Inc., 733 F.Supp.2d 471 (S.D.N.Y.2010) (login required). Cedeno applied Morrison in the context of RICO cases. In Cedeño, the foreign defendants’ sole connection to the United States was through its dealings with U.S. banks. The court in Cedeño, recognizing Morrison, held that, in the absence of specific statutory mention of “foreign enterprises,” the presumption against extraterritoriality held and RICO did not apply to foreign enterprises. The Cedeño court further held that the RICO statute applied to the relationship between the activity and the enterprise, rather than solely the activity (see In re Le–Nature's Inc., 2011 WL 2112533, (W.D.Pa. May 26, 2011)) (login required). Thus two of Morrison’s holdings seem to be applicable to RICO cases: 1) that an extraterritoriality inquiry is based on merit rather than jurisdictional and 2) that a statute does not apply extraterritorially in the absence of an express legislative statement.

The Alien Tort Statute (ATS) grants jurisdiction to some federal courts for certain violations of international law. In Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659, (2013), Nigerian petitioners claimed that they had standing to sue British, Dutch, and Nigerian corporations under the ATS because previous lower court decisions interpreted the ATS to extend beyond U.S. territory. Although both Kiobel and Morrison deal with claims arising abroad, in Kiobel, the respondent Royal Dutch Petroleum Co. argued that the ATS is not an exception to the presumption that U.S. law does  has no extraterritorial effect, and should not be applicable to actions outside of the U.S.

In Kiobel, the Court held that a U.S. federal court cannot hear a claim under the ATS where the claim arises out of conduct in a foreign country. The Court reasoned that federal common law should not be interpreted to apply to conduct on foreign soil because U.S. law is presumed not to apply extraterritorially. As a result, ATS cases require application of U.S. federal common law rather than the law of the country in which the incident occurred. Additionally, Kiobel’s references to EEOC v. Arabian American Oil Co., 499 U.S. 244 (1991) (Aramco) indicate that the Court was not concerned with the nationality of the defendants, but instead only with the place where the conduct took place.  Furthermore, the Supreme Court in Kiobel has proven that it has no restraint on limiting extraterritorial application of U.S. laws, which may have implications for other potential kinds of actionable conduct (i.e. money laundering or FCPA matters occurring abroad).

Therefore, Kiobel and the associated RICO cases have made it clear that in cases dealing with extraterritoriality, the trend is a presumption against extraterritorial activity unless otherwise expressly provided by a statute.

—David A. Hanna, Georgetown University School of Law, Washington, D.C.


October 21, 2013

Foreign Sovereign Immunity Waived Through ICSID

The U.S. Second Circuit Court of Appeals has determined in Blue Ridge Investments, LLC v. Republic of Argentina (2d Cir. August 19, 2013) that the adoption of the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention) by a foreign sovereign constitutes a waiver of immunity from suit in the United States under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1601, et. seq. The FSIA establishes the presumptive immunity of foreign sovereigns from being sued, subject to various specifically enumerated exceptions, including implied waivers under § 1605(a)(1), which the Blue Ridge court has determined is triggered upon becoming an ICSID Convention contracting state.

Blue Ridge involved an effort by the Republic of Argentina to resist confirmation of a $133.2 million arbitral award in the U.S. District Court for the Southern District of New York on the grounds that it was immune from suit in this country. The confirmation proceeding had been initiated for the purpose of attempting to attach assets held by Argentina in New York. An earlier proceeding to confirm the same award had been abandoned due to an inability to identify the specific assets for which execution would be sought.

The underlying arbitration was brought under the auspices of the ICSID Convention pursuant to a bilateral investment treaty between Argentina and the United States. The U.S.-Argentina treaty requires Argentina to comply with certain standards of conduct with respect to investments in Argentina by Americans, and calls for dispute resolution through an ICSID arbitration. The ICSID Convention provides an arbitral forum housed in the World Bank for the resolution of investor-state disputes, consent to which is commonly triggered by being a signatory to the Convention and entering an investment treaty. One key feature of the ICSID Convention is that it requires signatories to treat its awards as being equivalent to domestic judgments.

In Blue Ridge, an American investor in an Argentine energy sector concern initiated an arbitration seeking damages resulting from an alleged breach by Argentina of its obligation to adjust periodically tariffs associated with the investment based upon the U.S. Producer Price Index. An ICSID tribunal determined that Argentina had violated its obligation to accord the American investor “fair and equitable treatment” under the U.S.-Argentina bilateral investment treaty and rendered a large award, which Argentina has resisted satisfying for many years.

In determining that Argentina had impliedly waived its sovereign immunity under 28 U.S.C. § 1605(a)(1), the court invoked its earlier opinion in Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572 (2d Cir. 1993), where it held that sovereign immunity had been waived by becoming a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). The Second Circuit reasoned in both cases, addressing separate international conventions, that a foreign sovereign impliedly waives its sovereign immunity defense in U.S. courts when it signs a treaty—such as the ICSID and New York Conventions—that contemplate enforcement proceedings against that sovereign in the United States. Blue Ridge does not include any analysis of the potential distinctions between the New York and ICSID Conventions. Instead, its holding is focused on Article 54 of the ICSID Convention, which requires each signatory state to “recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State.”

Keywords: international litigation, ICSID, foreign sovereign immunity

Gustavo J. Lamelas, Lamelas Law, PA, Miami, FL


June 17, 2013

Kiobel v. Royal Dutch Petroleum: Closing the Door on Foreign Torts?

On April 17, 2013, the U.S. Supreme Court issued an opinion in Kiobel v. Royal Dutch Petroleum, 569 U.S. ___ (2013) (slip opinion) that controversially applied the presumption against extraterritoriality to the Alien Tort Statute (ATS) (Originally passed as part of the Judiciary Act of 1789, the ATS cryptically provides that “[t]he 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.” 28 U. S. C. §1350). The Court seemingly overturned 30 years of precedent pursuant to which U.S. courts have heard claims for torts violating international law committed in foreign jurisdictions pursuant to the ATS. See, e.g., Filártiga v. Peña-Irala, 630 F.2d 876 (2d Cir. 1980).

The plaintiffs, refugees living in the United States, claimed that they were subjected to torture and other gross human rights violations by the Nigerian government, which was aided and abetted by the defendants, including Royal Dutch Petroleum. Kiobel, 569 U.S. at 2. The Court focused on the question of whether a claim may reach conduct occurring in the territory of a foreign sovereign. Id. at 3. In order to answer this question, the Court applied a canon of statutory interpretation known as the presumption against extraterritoriality, which provides that “[w]hen a statute give no clear indication of an extraterritorial application, it has none.” Id. at 4 (citing Morrison v. National Australia Bank Ltd., 561 U.S. ___, ___ (2010) (slip op., at 6). Concluding that nothing in the statute’s text or history clearly rebutted the presumption, the Court held that the plaintiffs’ “case seeking relief for violations of the law of nations occurring outside the United States is barred.” Id. at 14.

Professors Julian Ku and John Yoo celebrated the opinion, noting that it “provides a wise example of judicial restraint and deference to the role of Congress and the president to set American foreign policy.” Julian Ku and John Yoo, The Supreme Court Unanimously Rejects Universal Jurisdiction, April 21, 2013. Other commentators, including Terra Lawson-Remer of the Council on Foreign Relations, lament the impact that this ruling will have on human rights accountability noting that "victims of torture, arbitrary executions, and other human rights abuses in foreign countries" can no longer "seek justice in U.S. courts." Terra Lawson-Remer, The U.S. Supreme Court and Global Human Rights, April 18, 2013.

Interestingly, the issue of extraterritorial application of the ATS was not the question upon which certiorari was granted in Kiobel. The Second Circuit had dismissed the claim on the ground that international law did not recognize corporate liability. Following extensive briefing of this issue and oral argument, the Court directed the parties to file supplemental briefs on the question of extraterritoriality, upon which a second round of oral argument was also held.

Keywords: international litigation, Alien Tort Statute, foreign torts

Harout Jack Samra, DLA Piper, Miami, FL


June 17, 2013

Dallas Bankruptcy Court Refuses to Recognize Mexican Corporate Reorganization Plan

On June 15, 2012, a U.S. bankruptcy judge in the Northern District of Texas declined to issue an injunction requested by Vitro, S.A.B. de C.V., a debtor in a Mexican reorganization case. Vitro had filed a Chapter 15 bankruptcy case in Dallas, seeking the assistance of the U.S. courts to enforce a reorganization plan (Concurso), which had been approved in its “foreign main proceeding.”

On February 3, 2012, a Mexican court had issued a Concurso Approval Orderunder the authority of the Mexican Ley de Concursos Mercantiles (Bankruptcy Law), in the Vitro case, which is largely analogous to Chapter 11 reorganizations in the United States. Following the entry of the order, Vitro moved to the bankruptcy court for injunctions to enforce the terms of the Concurso.

Affected creditors objected to the proposed injunction, explaining that they held valid guarantees of Vitro’s debt and that the Concurso, which allowed various insiders to obtain almost U.S. $500 million in benefits while prohibiting the holders of guarantees from pursuing non-debtor subsidiaries, was so completely at odds with U.S. law and public policy that the bankruptcy court should not grant the requested injunction.

For the bankruptcy court, there were two primary issues at stake: First, the order prohibited Vitro creditors who held guarantees of their obligations from third parties from pursuing collection. Should the bankruptcy court enforce that prohibition as a matter of “comity”? Second, should the extension of comity by the bankruptcy court be limited under 11 U.S.C. § 1506, where enforcing the foreign order would be “manifestly contrary” to the public policy of the United States? Ultimately, the bankruptcy court agreed with the objectors.

Chapter 15 of the Bankruptcy Code was enacted in 2005 to (1) codify the process by which cross-border bankruptcies and liquidations might obtain judicial recognition in the United States and (2) to provide for the enforcement of rulings emanating from the “foreign main proceeding,” subject to a public policy exception provided by 11 U.S.C. § 1506, which limits the extension of comity to foreign court judgments where it would be “manifestly contrary” to the public policy of this country.

In addition to the basic effect of recognition by a U.S. court of a “foreign main proceeding” under 11 U.S.C. § 1520, additional relief may be granted to protect the assets of the debtor or the interest of creditors under 11 U.S.C. § 1521. Moreover, the statute provides that “additional assistance may be provided to the Foreign Representative of the Debtor consistent with principles of comity.”

11 U.S.C. §1522(b) permits the court to impose conditions on any discretionary relief that it may grant. Although section 1507(b) provides a list of issues for the bankruptcy court to consider in enforcing a foreign judgment, comity should be the primary consideration. Comity is defined as the “recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protections of its laws.” Hilton v. Guyot, 159 U.S. 113, 163–64 (1895).

Generally, granting comity to judgments in foreign bankruptcy proceedings is appropriate so long as U.S. parties are able to obtain the same fundamental protections that litigants in the United States would enjoy. Here, the Vitro court explained that “the principle of comity has never meant categorical deference to foreign proceedings. It is implicit in the concept that deference should be withheld where appropriate to avoid violation of the laws, public policies, or rights of the citizens of the United States.” Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro, S.A.B. de C.V.), No. 11-33335-HDH-15, 2012 WL 2138112 (Bankr. N.D. Tex. June 13, 2012).

Ultimately, the bankruptcy court concluded that the Mexican Concurso, which extinguished the guarantee claims of the objecting creditors in the United States against entities who were not debtors in the Mexican case, should not be accorded comity. It therefore would not be enforced. Even so, the court took pains to acknowledge that, generally speaking, reorganization pursuant to the Mexican Ley de Concursos Mercantiles is a fair process and worthy of respect. The bankruptcy court simply would not countenance the Mexican court’s release of third parties who were not debtors in the reorganization case from their guarantee obligations to creditors.

Although there is a general reluctance in this country to rely on foreign law in resolving American cases, a Chapter 15 cross-border bankruptcy is primarily a foreign case, with certain U.S. components. Obviously, a line must be drawn somewhere short of total uncritical acceptance of all foreign rulings and foreign main proceedings, but determining where to draw the line is difficult. An expedited appeal has been taken to the Fifth Circuit.

Keywords: litigation, international comity, public policy exception, In re Vitro

Ronald G. Neiwirth, Boyd & Jenerette, P.A., in Miami, Florida.


January 8, 2013

Legal Inquiry into U.K.'s Role in Pakistan Drone Strike Denied

In December 2012, a London High Court refused to enter into a judicial inquiry assessing the U.K Government Communications Headquarters’ (GCHQ) role in aiding the United States’ drone strikes in Pakistan, after holding a two-day hearing in October.

The ruling, issued by Lord Justice Moses, blocked Noor Khan’s challenge, favoring the Foreign and Commonwealth Office in the United Kingdom. Although the claimant’s explicit purpose was to challenge the United Kingdom’s “decision” to provide “locational intelligence” to the United States, the court found that his true purpose was to persuade the English court to do what it could to stop the U.S. drone strikes in Pakistan, putting the United States on trial in an English court. As a domestic venue, the court refused to examine this issue and declare the U.S. strikes illegal, based on the principal that it could not sit in judgment on the sovereign acts of a foreign state. Furthermore, Court was also concerned about national security and international relations because adjudicating the issue might complicate and damage the relationship between Britain and the United States. Additionally, the facts of the case were too vague to issue a decision as to whether employees of the GCHQ were guilty of violating English law.

Controversy surrounds this decision—because the United Kingdom’s actual role in the drone strikes remains concealed, some worry about the strain the decision may put on the United Kingdom’s relationship with Pakistan. However, Noor Khan plans to appeal the decision. He has also brought a parallel suit in Pakistan to uncover Pakistani involvement in the drone strikes.

Keywords: international litigation, Yahoo, Mexico, Yellow Pages, breach of contract

Rohani Mahyera, J.D., Emory University School of Law


December 7, 2012

Yahoo Ordered to Pay $2.7 Billion in Breach-of-Contract Suit

A civil court in Mexico City ordered Yahoo to pay two Mexican companies, Worldwide Directories, S.A. de C.V., and Ideas Interactivas S.A. de C.V., $2.7 billion for a suit where the companies alleged breach of contract, breach of promise, and lost profits.

The suit, brought against Yahoo Inc. and Yahoo de Mexico S.A. de C.V., arose after Yahoo de Mexico made a deal with Ideas Interactivas to create an online page that would help people find information about local businesses, including their contact information. The online business would be complemented by a printed book designed to compete with Google, and would include maps, businesses, landmarks, offers, and discounts. Businesses would have the option of advertising at a low cost. However, at some point, the deal went sour.

The details of the suit are currently unclear. The judgment itself has not been made public. Yahoo reported to its investors in a press release that the claims are without merit and it will appeal the decision, categorizing the judgment as “non-final.” If Yahoo does not win the appeal, it stands to lose over one-third of the cash it held at the end of September, putting a dent in its $1.2 billion earnings last quarter.

Keywords: international litigation, Yahoo, Mexico, Yellow Pages, breach of contract


November 13, 2012

U.K. Under Fire for U.S. Drone Strikes in Pakistan

A London High Court held a two-day hearing in October for a case brought by Noor Khan, a Pakistani man whose father was killed in a U.S. drone strike in Pakistan. Khan alleged that U.K. intelligence officials provided assistance with the drone strike and should be prosecuted.

On March 17, 2011, Noor Khan’s father was chairing a peaceful tribal assembly meeting when he was killed by an unmanned aerial vehicle missile strike in northern Pakistan. Khan alleged that U.K. intelligence officials participated in the drone strikes by passing intelligence to the U.S. government. Khan sought a declaration by the U.K. courts that such intelligence sharing is unlawful.

The U.K. government is pushing the High Court to refuse to adjudicate the case further, as a ruling in Khan’s favor would significantly impact the U.K.’s relationship with the U.S. and Pakistan. Some U.K. government lawyers are arguing that this case brings up sovereign foreign state issues that cannot be decided by English courts. The U.K. government has neither confirmed nor denied the allegations by Khan.

However, Khan’s lawyer explained that the U.K.’s Government Communications Headquarters’ involvement in the drone attacks could amount to war crimes or crimes against humanity. Khan’s lawyers are seeking permission for a full judicial review of the lawfulness of the U.K.’s involvement to further assess the issue.

If the High Court grants a full judicial review, it will have to consider: a) both the legality of drone attacks under international law and U.S.’s argument of using drone attacks as self-defense; and b) the application of international humanitarian law to the attacks. Then the Court has to ultimately decide if the drone attack is a part of an international armed conflict. Such issues, although tricky to decide, are crucial in assessing the political implications of drone attacks, which the U.S. and the U.K. have significantly increased in Pakistan and Afghanistan, respectively. The Court is currently scheduled to decide this case before the end of this year.

Keywords: international litigation, London High Court, drone strike, unmanned aerial vehicle, Government Communications Headquarters

Rohani Mahyera, J.D., Emory University School of Law


October 1, 2012

President Obama Files WTO Complaint Against China

On Monday, September 16, President Barack Obama filed a complaint with the World Trade Organization (WTO) against China, charging the country with unfairly subsidizing exports of cars and automobile parts. China allegedly gave exporters $1 billion in illegal subsidies from 2009 until 2011—actions that violate WTO prohibition against export-contingent subsidies and China’s agreement to eliminate export subsidies, made when the country joined the WTO in 2001.

This hugely impacts the American economy because it encourages companies to take advantage of low production costs and outsource jobs to China, which hurts manufacturers stateside and negatively affects the United States’ ability to compete.

Ron Kirk, the U.S. Trade Representative, said his staff has been investigating China’s auto subsidies for a while. This is the ninth trade action the Obama administration has brought against China. In July, the president brought an enforcement action against China over its unfair antidumping and countervailing duties on U.S. automobile exports to the country, which made automobiles more expensive to manufacture outside of China. Earlier this year, the Obama administration accused China of restricting exports of rare earth metals used to make high-tech devices.

After the current complaint, China announced that it is filing its own WTO case against the U.S., alleging unfair calculation of penalty tariffs in anti-subsidy cases. It is unclear whether China’s announcement was in response to Obama’s newest trade action.

These actions will not likely impact the American economy in the near future, as WTO trade cases can take over a year before the issuance of a final decision. They may, however, play a key role in the upcoming presidential election, where protection of American workers and trade policy are major issues. 

Keywords: international litigation, trade action, World Trade Organization, WTO, China, automobile manufacturers, Ron Kirk

Rohani Mahyera, J.D., Emory University School of Law


September 17, 2012

Libya Loses Cybersquatting Trademark Case

On September 6, a U.S. District Court ruled against Libya in a cybersquatting case. (Libya v. Miski, No. 06-2046 (D.D.C. Sep. 6, 2012)). In 2006, Libya filed a lawsuit against Ahmed Miski, an expeditor whose work included helping individuals expedite the acquisition of legal documents from the Libyan embassy. In 2002 and 2003, Miski had registered the domain names “embassyoflibya.org,” “libyaembassy.com,” “libyaembassy.org,” and “libyanembassy.com,” and forwarded them to the website he used to solicit clients for his services.

The Libyan government alleged that the domain names should be trademark-protected. The Libyan embassy never formally trademarked the domain names, but argued the names were suggestive and thus warranted automatic trademark protection because the names represented a type of service provided—the legalization of documents.

The district court sided with Miski, finding the domain names “Embassy of Libya” or “Libyan Embassy” unworthy of trademark protection, and allowing Miski to retain them for his use. The court decided the names were not suggestive, but merely descriptive, giving them no protection from Miski’s use. The domain names could refer to a host of services the embassy provided other than legalizing documents, and consumers did not have to use their imagination to understand what the embassy was referring to. Furthermore, Libya failed to show any actual consumer confusion or continuous use of the domain name.

The Libyan government currently uses the domain name “libyausaembassy.com.” Although Miski’s plan for future use of the domain names is unclear, he can continue to use them lawfully. This case highlights the importance of both facts and the geopolitical climate in a trademark case, as the U.S. prohibition on commercial trade with Libya and a block on Libyan government property in the U.S. during the 1980s made it difficult for Libya to establish continuous use of its marks.

Keywords: litigation, international litigation, trademark, Libya, cybersquatting, domain

Rohani Mahyera, J.D., Emory University School of Law


August 9, 2012

Mexico Regulators Fine HSBC $28 Million for Money Laundering

Mexican financial regulators fined the Mexico subsidiary of HSBC Bank $28 million on July 25, 2012, for failing to prevent money laundering through its accounts. HSBC has paid the fine, which was equivalent to half of the subsidiary’s 2011 annual profits. This is the highest fine Mexican regulators have ever imposed on a bank.

Mexico’s National Securities and Banking Commission, along with a U.S. senate investigative committee, found that the bank failed to control suspicious flows of billions of dollars through its accounts. It also did not respond promptly when it was warned about a huge swell in dollar cash transactions at the bank.

The violations began in the early 2000s. According to the commission, regulators detected and warned the bank about suspicious transactions back in 2007 and 2008. When local management did not respond, the regulators contacted the top management of the bank’s central offices—an unusual step for the regulators.

The U.S. senate investigative committee reported that, in 2007 and 2008, the HSBC Mexico subsidiary moved about $7 billion in bulk cash to the United States, which could happen only if the shipment included illegal drug proceeds. HSBC’s lax controls allowed Mexican drug cartels to launder billions of dollars through HSBC for several years.

HSBC Mexico admitted its failure to report 39 suspicious transactions and was late in reporting 1,729 others. It also admitted to generally failing to strictly comply with bank regulations and standards expected of the institution.

HSBC responded with “drastic and assertive” corrective measures and, by 2009, became the first Mexican bank to completely stop handling cash dollar transactions. It has implemented the regulators’ recommendations and refuses to do business with dodgy clients.

The U.S. senate committee also found that HSBC’s affiliates skirted U.S. government’s rules banning banks from engaging in financial transactions with some countries, such as Iran. HSBC also allegedly provided money and banking services to foreign banks believed to have helped fund terrorist groups like al-Qaida.

The U.S. Justice Department is now conducting a criminal investigation into HSBC’s operations. The fine paid to Mexico is separate from any settlement the bank may negotiate with the Justice Department.

Keywords: litigation, international litigation, money laundering, finance, Mexico National Securities and Banking Commission

Rohani Mahyera, J.D., Emory University School of Law


July 19, 2012

Constitutional Defenses Available to Foreign Instrumentalities

The U.S. Court of Appeals for the District of Columbia Circuit has issued an opinion in GSS Grp. Ltd. v. Nat’l Port Auth., 680 F.3d 805 (D.C. Cir. 2012), addressing the extent to which a corporation controlled by a foreign state may invoke U.S. constitutional defenses to resist personal jurisdiction. The court reconciled tension between the unavailability of constitutional defenses to foreign sovereigns and the availability of such defenses to foreign corporations in concluding that a corporation controlled by a foreign state could assert due-process defenses to jurisdiction where the corporation retained sufficient independence from the foreign sovereign to remain an “independent juridical entity” that did not constitute an “agent of the state.” The court further determined that such a constitutional defense could be invoked successfully even where the statutory basis for personal jurisdiction under 28 U.S.C. § 1608 of the Foreign Sovereign Immunities Act (FSIA) had been satisfied.

Jurisdiction Dispute in an Arbitration Confirmation Proceeding
The case involved an effort to confirm in the United States an international arbitration award against the National Port Authority of Liberia, a corporation wholly owned by the Liberian government that is responsible for the oversight of Liberia’s port facilities. The award followed an arbitration in London brought successfully by GSS Group Ltd. involving a dispute over the construction and management of a container park in Liberia.

Port Authority resisted GSS Group’s efforts to confirm the award in the United States—pursuant the Federal Arbitration Act, 9 U.S.C. § 201 et seq., and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517—by alleging that it was not subject to the personal jurisdiction of the U.S. district court. Port Authority asserted a due-process defense under the U.S. Constitution that it lacked the necessary “minimum contacts” with the United States to establish personal jurisdiction because it had no offices or employees in the United States and had never engaged in any commercial activity in the United States.

Statutory Jurisdiction Is Overridden by the Constitutional Defense
The D.C. Circuit acknowledged that GSS Group had established statutory personal jurisdiction over Port Authority pursuant to 28 U.S.C. § 1330 and the FSIA. Section 1330(a) establishes subject-matter jurisdiction over actions against a foreign state as defined by FSIA § 1603(a), and personal jurisdiction is granted by § 1330(b) where the foreign state has been served with process pursuant to FSIA § 1608. Port Authority is a foreign state for purposes of these statutes because the definition provided in § 1603(a) (and § 1603(b)) encompasses “an agency or instrumentality of a foreign state,” including a corporation owned by a foreign state.

The court, however, determined that the statutory basis for personal jurisdiction was overridden by Port Authority’s constitutional defense. In so holding, the court rejected GSS Group’s contention that because Port Authority satisfied the FSIA definition of a foreign state, it must also be treated as a foreign sovereign for purposes of assessing the availability of constitutional defenses. The D.C. Circuit had earlier held in Price v. Socialist People’s Libyan Arab Jamahiriya, 294 F.3d 82, 96-97 (D.C. Cir. 2002), that foreign states are not “persons” for purposes of the Fifth Amendment and therefore may not invoke constitutional defenses to the assertion of personal jurisdiction. The GSS Group case also distinguished TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 300-01 (D.C. Cir. 2005), where the court had extended Price to conclude that a foreign corporation also lacks due-process defenses where it is so closely controlled by a foreign state that it constitutes an agent of the state and not a juridical entity distinct from the state itself.

The holding in GSS Group that certain foreign corporations owned by foreign sovereigns may assert constitutional defenses to personal jurisdiction is based on the degree of control analysis that the D.C. Circuit had applied in the TMR Energy case. Port Authority was determined to be sufficiently independent of the Liberian government to warrant treatment analogous to that afforded private foreign corporations, which have been permitted to invoke constitutional defenses by many U.S. courts. The D.C. Circuit’sreasoning ultimately rests on First Nat’l City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611 (1983) (BANCEC), which the GSS Group court concludes “is the exclusive means for determining whether a foreign state-owned corporation is a ‘person’ for Fifth Amendment purposes.” GSS Grp., 680 F.3d at 816. In BANCEC, the Supreme Court established a rebuttable presumption—in a context that did not involve a jurisdiction dispute—“that government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.” BANCEC, 462 U.S. at 626–27.

The resulting test established by GSS Group for whether constitutional defenses are available to foreign-state-controlled entities is that

[w]henever a foreign sovereign controls an instrumentality to such a degree that a principal-agent relationship arises between them, the instrumentality receives the same due process protection as the sovereign: none. . . . On the other hand, if an instrumentality does not act as an agent of the state, and separate treatment would not result in manifest injustice . . . the instrumentality will enjoy all the due process protections available to private corporations.

GSS Grp., 680 F.3d at 815.

Keywords: litigation, international litigation, personal-jurisdiction defenses, instrumentalities of foreign states

—Gustavo J. Lamelas, DLA Piper LLP (US), Miami, Florida


July 19, 2012

Judge Reflects on Past and Future on ICC's 10th Anniversary

It is hard to believe that the International Criminal Court (ICC), which is now operating in seven countries and monitoring seven more, was founded just 10 years ago with the signing of the Rome Statute. On this anniversary, which also marks the first year in which the ICC has rendered a judgment, the ICC president, Judge Sang-Hyun Song, has written an article discussing both where the ICC court has gone to date and where he sees the ICC going in the future. As Judge Song notes:

Support for international justice is growing around the world every year. Everywhere, people want peace, justice, rule of law and respect for human dignity. The ICC represents the voluntary gathering of nations in a community of values and aspirations for a more secure future for children, women and men around the world.

However, rather than rejoice over our accomplishments, it is far more important that we recognise the shortcomings and the obstacles that remain, and redouble our commitment to further strengthen the Rome Statute system in order to move closer to our ultimate goals. If we act wisely, pulling our strength together, we can prevent terrible suffering before it takes place.

Although the United States is one of 139 states that originally signed the Rome Statute, the United States has notably failed to ratify it, and all evidence to date indicates that it will not do so in the future.

Keywords: litigation, international litigation, International Criminal Court, Rome Statute

Anthony Ellis, Hahn & Hessen LLP, New York, New York


July 18, 2012

Circuit Court Allows Discovery in International Arbitration

On June 25, 2012, the U.S. Court of Appeals for the Eleventh Circuit issued a noteworthy decision that will have a significant impact on the taking of evidence in international arbitration. By holding that arbitral tribunals constitute a “foreign or international tribunal” for purposes of 28 U.S.C. § 1782, the court substantially cleared the path for parties seeking to obtain discovery available in the United States for use in international arbitration proceedings.

In Consorcio Ecuatoriano de Telecomunicaciones S.A. v. JAS Forwarding (USA), Inc., No. 11-12897, 2012 WL 2369166 (11th Cir. Jun. 25, 2012), the court granted Consorcio Ecuatoriano de Telecomunicaciones S.A.’s (CONECOL) Section 1782 application to obtain discovery for use in Ecuador before the Center for Arbitration and Conciliation of the Guayaquil Chamber of Commerce. The court found the arbitral tribunal to be a foreign tribunal for the purposes of the statute, an issue that had been subject to considerable controversy, thus permitting discovery in international arbitrations to be sought in U.S. federal courts.

The underlying arbitration arose out of a foreign shipping contract billing dispute between the petitioner, CONECOL, and the respondent, Jet Air Service Equador S.A. (“JASE”). CONECOL originally filed an application pursuant to Section 1782 in the Southern District of Florida to obtain discovery for use in the Ecuadorian arbitration. Specifically, CONECOL sought document production from JASE’s U.S. affiliate, which did business in Miami, Florida, relating to an alleged overbilling scheme conducted by JASE, as well as documents pertaining to two of CONECOL’s own employees, who were alleged to have colluded with JASE. In addition, CONECOL sought to depose persons from JASE’s U.S. affiliate with knowledge pertaining to such documents or services rendered to CONECOL by JASE or its affiliate over the relevant time period. The district court granted the Section 1782 application and authorized CONECOL to issue a subpoena.

The Eleventh Circuit was confronted with the issue of whether the Ecuadorian arbitration body could be considered a foreign tribunal for purposes of the statute, a matter of first impression for the court. The court responded in the affirmative, holding “that the arbitral tribunal before which JASE and CONECOL’s dispute is now pending is a foreign tribunal for the purposes of the statute.”

Pointing to Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241 (2004), the Supreme Court’s watershed decision addressing Section 1782, the court concluded that the Ecuadorian arbitral tribunal qualified as a foreign tribunal under the statute because “it acts as a first-instance decision-maker; it permits the gathering and submission of evidence; it resolves the dispute; it issues a binding order; and its order is subject to judicial review.” Thus, the court relied on Intel as providing “substantial guidance” in favor of adopting an expansive definition of tribunals that included arbitration proceedings.

The Significance of Consorcio Ecuatoriano
Following its decision in Consorcio Ecuatoriano, the Eleventh Circuit became the first and only circuit court of appeals to conclude that arbitral tribunals qualify under Section 1782. Although the court’s interpretation has garnered significant support among district courts throughout the country, the decision is particularly important because the only other circuit court to address the issue, the Fifth Circuit Court of Appeals in El Paso Corp. v. La Comision Ejecutiva Hidroeclectrica del Rio Lempa, No. 08-20771, 2009 WL 2407189 (5th Cir. Aug. 6, 2009), reached exactly the opposite result, concluding that Section 1782 does not apply to discovery for use in a private international arbitration. Significantly, the Fifth Circuit concluded that Intel did not disturb prior Fifth Circuit precedent, Republic of Kazakhstan v. Biederman, 168 F.3d 880 (5th Cir. 1999). Prior to Intel, the Second Circuit had also reached an similar conclusion in National Broadcasting Co. v. Bear Stearns & Co., 165 F.3d 184 (2d Cir. 1999).

Given this historic opposition to the premise that international arbitrations qualify as tribunals under Section 1782 and the ratification of that interpretation by the Fifth Circuit in El Paso following Intel, Consorcio Ecuatoriano represents a significant new precedent that may galvanize the previously scattered district courts that have addressed the issue in recent years. Further disagreement is possible among the circuit courts of appeals, likely leaving a final determination of this issue to the Supreme Court.

The Practical Consequences
Although commentators will debate the merits of the Eleventh Circuit’s decision for the foreseeable future, its consequences are unmistakable. Parties to international arbitration proceedings will have access to U.S. federal courts for discovery. This development is particularly significant where only one of the parties has activities in the United States, as it could create a strategic advantage for the non-U.S. party. Moreover, although the court’s decision in Consorcio Ecuatoriano may cause parties to incur greater costs and delays, it will also assist fact-finders by providing them with access to previously unavailable evidence.

Keywords: litigation, international litigation, Eleventh Circuit, arbitration, arbitral tribunals

—Harout Jack Samra, DLA Piper LLP (U.S.) and Kamal Sleiman, J.D. Candidate, University of Miami School of Law (2014)


July 3, 2012

Not Disclosing FCPA Liability Leads to Malpractice Claim

Sidley Austin was hired by Watts Water Technologies, a publically traded Massachusetts water valve-manufacturing company, to conduct due diligence before acquiring Changsha Valve, a Chinese entity. Watts bought the company for $9 million and, years later, uncovered Changsha’s written kickback policy during an in-house Foreign Corrupt Practices Act (FCPA) compliance program. Watts hired new counsel who found that same written policy among Sidley’s files. Sidley never mentioned it in the mergers and acquisitions due diligence report. Watts self-reported the FCPA violations, paid $3.7 million in penalties, and disgorged profits––and then sold Changsha at a loss. Now, Watts is suing Sidley.

Keywords: litigation, international litigation, malpractice, Foreign Corrupt Practices Act

—Max Bonici, J.D. candidate 2013, The George Washington University Law School


July 3, 2012

RICO Suit Proceeds Against Foreign State-Owned Entity

Aluminum Bahrain (Alba), a state-owned foreign company, has filed suit in federal court for more than $1 billion, alleging that aluminum maker, Alcoa, paid bribes to Alba officials through an intermediary to win bloated contracts amounting to $400 million in illegal revenue.

While the reach of the Racketeer Influenced and Corrupt Organizations Act (RICO) after Morrison is not entirely clear in all districts, allegations that tie a scheme to the United States can be enough to bring suit under RICO, especially when the “decision-making vital to the sustainability of the enterprise, came from [within the United States].” Documents filed with the court allege that executives in Pittsburgh, Pennsylvania, Alcoa’s principal place of business, arranged the scheme. The court will hear the case.

A simultaneous Foreign Corrupt Practices Act (FCPA) criminal investigation is underway.

Keywords: litigation, international litigation, Racketeer Influenced and Corrupt Organizations Act, Foreign Corrupt Practices Act

—Max Bonici, J.D. candidate 2013, The George Washington University Law School


July 3, 2012

Lawyer Says Filing Necessary to Aid Investigation of Crash

Following the tragic Nigerian plane crash earlier this June, a Nigerian widower domiciled in Lagos is suing on the grounds that his wife’s death was the result of a “dangerous and defective” aircraft and an “unreasonably dangerous” engine. The suit names Boeing, its subsidiary McDonnell Douglas Corp., engine makers Pratt & Whitney Canada Corp., and United Technologies Corp. He is also suing the estate of the U.S. pilot for “negligence and carelessness” when attempting to land. The late pilot made a mayday call, citing engine failure.

Although an investigation is underway to determine the cause of the crash, it could take a year to complete. The widower’s attorney filed immediately, admitting that the exact cause was unknown, but prompt filing would allow his investigators to inspect the scene as well as give this suit priority over any others that may follow.

The suit was filed in federal court in Illinois, Boeing’s principal place of business; the plaintiff expects a fairer trial in the United States.

Keywords: litigation, international litigation, aviation, Nigeria, investigation

—Max Bonici, J.D. candidate 2013, The George Washington University Law School


June 11, 2012

Actors Battle over Dispute Arising from Gulf Oil Spill

Hollywood actor Stephen Baldwin and his friend Spyridon Contogouris, a New Orleans businessman, sued actor Kevin Costner in federal court over a dispute arising from the 2010 oil spill in the Gulf of Mexico. Baldwin and Contogouris allege that Costner and his business partner, Patrick Smith, tricked them into selling their stock in Ocean Therapy Solutions, a company that makes and markets oil-spill-cleanup machines, the same week British Petroleum placed a multimillion-dollar order with the company for the technology.

Costner allegedly lobbied BP to use the oil-spill-cleanup devices marketed by Ocean Therapy Solution. BP ordered 32 centrifuges for $52 million and made an $18 million deposit for the machines. Baldwin and Contogouris contend that they were deliberately excluded from a June 2010 meeting between BP and Costner, where the deal was discussed. Baldwin and his friend agreed to sell their combined 38 percent ownership stake in Ocean Therapy Solution for $1.9 million to Costner and Smith, who supposedly used BP’s deposit to buy the shares. Because of the sale, Baldwin and Contogouris lost a portion of an $18 million deposit from BP.

On June 4, 2012, the day the trial opened, Costner’s attorney argued that the only reason Baldwin and Contogouris sued Costner was because he is famous, and Baldwin and his partner hedged their bets by selling their stock. However, the plaintiffs’ attorneys accused Costner of cheating Baldwin and Contogouris of millions of dollars. They are now seeking more than $21 million in damages, and the defendants are also seeking damages in counterclaims. Both Baldwin and Costner are expected to appear in court every day for the duration of the trial.

Keywords: litigation, international litigation, oil spill, Hollywood, Stephen Baldwin, Kevin Costner, Gulf of Mexico

—Rohani Mahyera, J.D., Emory University School of Law


June 7, 2012

FCPA Win for DOJ, State-Actor Theory for Counsel Rejected

The Department of Justice (DOJ) has suffered major Foreign Corrupt Practices Act (FCPA) enforcement setbacks due to prosecutorial misconduct and other reasons. Nevertheless, the storm clouds seem to be clearing. Consider recent news on Control Components Inc. (CCI), a California energy technologies company. Recently, the DOJ scored a big win when a third defendant, Paul Cosgrove, former executive vice president for worldwide sales, pleaded guilty to bribing a foreign official in China. That’s three pleas out of six defendants in two months.

Although CCI entered into a deferred prosecution agreement and agreed to pay $18.2 million in fines, these former executives are being prosecuted pursuant to a 16-count indictment that includes FCPA violations [PDF]: $4.9 million in bribes as well as furnishing luxurious vacations to officials from China, Malaysia, South Korea, the United Arab Emirates, and beyond, in exchange for contract deals.

More on the recent motion filings is available, but, in short, the defendants tried to suppress their own statements made in an internal investigation on the grounds that, because CCI cooperated in the investigation with the DOJ, CCI counsel became a government agent or a state actor. As a result, the defendants argued, the statements were improperly compelled in violation of Fifth Amendment rights, and, thus, the case should be dismissed on due-process grounds. The judge rejected the state-actor theory and did not find a “systemic or systematic denial of access to evidence enabling the Defendants to present a complete defense.” This decision has likely paved the way to the guilty pleas.

The other defendants who had previously pleaded guilty—Stuart Carsons, Richard Morlok, Mario Covino, and Flavio Riccotti, all former executives—will be sentenced at the end of this year. David Edmonds, former vice president for worldwide customer service, is the last defendant standing. His trial is scheduled for June 26. Stay tuned.

Keywords: litigation, international litigation, Department of Justice, Foreign Corrupt Practices Act

—Max Bonici, J.D. candidate 2013, The George Washington University Law School


June 7, 2012

Tunisian Judges Protest Government's Dismissal of Judges

In recognition of the importance of the rule of law in a civilized society, Tunisia’s judges went on strike last month to protest the government’s summary dismissal of 81 magistrate judges accused of having ties to former ousted leader Zine el-Abidine Ben Ali. The judges noted the strike would continue until the dismissed judges were given a “fair trial and the right of defense.”

Keywords: litigation, international litigation, Tunisia, Zine el-Abidine Ben Ali, rule of law

Anthony Ellis, Hahn & Hessen LLP, New York, New York


May 22, 2012

House Committee Approves Bill Reducing Foreign Aid

On Thursday, May 17, 2012, the U.S. House of Representatives Appropriations Committee approved the Fiscal Year 2013 State and Foreign Operations Appropriations Bill, a provision of which, approved by a voice vote, suspends foreign aid to any country that hosts the Sudanese President Omar al-Bashir.

Omar al-Bashir is a highly controversial figure wanted by the International Criminal Court (ICC) for genocide and war crimes, and the ICC has issued an arrest warrant for him. He is particularly controversial because of his actions during the Darfur conflict, and he has continued to commit crimes against humanity in Darfur. Several African countries have refused to enforce the ICC’s arrest warrant, but, after his second visit to Kenya, the Kenyan High Court, in November 2011, ruled that he must be arrested if he ever returned to Kenya.

Congressman Frank Wolf (R-VA) calls this provision “an example of effectively utilizing U.S. foreign assistance to further U.S. interests and to support oppressed and marginalized people in Sudan and around the globe.” The legislation is not yet a law, as it still needs to be voted on by the full House of Representatives and reconciled with a separate Senate version. Therefore, it could change as it moves through Congress this year. If passed, it could affect U.S. spending by approximately 9 percent. However, some lawmakers are concerned about the provision’s effects on U.S. policy and its relationship with its allies. Because Bashir has visited several countries in the past year, including Ethiopia, China, Egypt, and Saudi Arabic, the provision would cut off funding to all of these countries.

Keywords: litigation, international litigation, foreign aid, Omar al-Bashir, Sudan, House of Representatives, International Criminal Court

—Rohani Mahyera, J.D., Emory University School of Law 2012


May 16, 2012

Federal Court Denies Hague Convention Rules Take Priority

The Litigation News article "Federal Procedural Rules Trump Hague Convention" looks at a federal district court decision that held that a foreign corporation defending a civil action in the United States must comply with its discovery obligations under the Federal Rules of Civil Procedure, even if the corporation faces possible criminal liability abroad for doing so.

Keywords: litigation, international litigation, discovery, Federal Rules of Civil Procedure

—J. Chad Mitchell, Summit Law Group, Seattle, Washington


May 1, 2012

Wal-Mart Is Accused of Bribery in Mexico

A New York Times article, “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle,” indicates that Wal-Mart and its large Mexican subsidiary, Wal-Mart de Mexico, are accused of orchestrating a “campaign of bribery” to develop a market presence and ultimately dominate the Mexican retail market. After uncovering the bribes, the article claims, senior Wal-Mart executives promptly moved to either hinder the investigation or stop it altogether and ultimately permitted the individuals accused of perpetrating the scheme to have the final say on whether there was evidence of wrongdoing.

Wal-Mart officials admitted they are currently investigating the issue and the potential cover-up, and a spokesperson for Wal-Mart stated, “We are deeply concerned by these allegations” and “will not tolerate noncompliance with [the Federal Corrupt Practices Act (FCPA)] anywhere or at any level of the company.”

If the allegations are proven true, Wal-Mart and its executives could face serious fines, and those responsible could face jail time in the United States. This article presents a good opportunity to remind our corporate clients of the seriousness of the FCPA and its criminal and civil penalties, and it also presents a case study in how not to handle a corporate investigation of wrongdoing.

Keywords: litigation, international litigation, Wal-Mart, Mexico, bribery, Federal Corrupt Practices Act

Anthony Ellis, Hahn & Hessen LLP, New York, New York


April 13, 2012

International Court Issues First Judgment, Indicts Warlord

The International Criminal Court issued its first judgment, unanimously finding the Congolese warlord, Thomas Lubanga, guilty for using child soldiers. The Prosecutor v. Thomas Lubanga Dyilo [PDF], Case No. ICC 01/04-01/06-2842, Judgment (Mar. 14, 2012). He was found to have snatched children off the streets and used them in his military and as bodyguards. This trial, which began in January 2009, ended after two years on March 14, 2012, with this judgment. The hearing for his sentencing will be scheduled later this year. He faces a possible sentence of life imprisonment. The court cannot impose a death penalty.

Thomas Lubanga was prosecuted for enlisting children under the age of 15 and using them to participate in hostilities. The trial had come with its own problems: The prosecution limited the scope of allegations against him, as there were additional claims related to sexual violence against women and girls. Furthermore, the prosecution had previously been chastised by the court for its failure to disclose evidence to defense lawyers. Nonetheless, the trial was the first at an international court that focused on the use of child soldiers. It was also the first trial at an international tribunal that allowed victims to testify and demand compensation.

This is the first verdict by the International Criminal Court in its 10-year history. The court has been limited in the past by its inability to enforce arrest warrants because it does not have a police force of its own and has to rely on states. However, only 121 countries recognize its jurisdiction in the first place.

The hope for this judgment is that it will deter armies around the world from using children. The United Nations has established that there are still tens of thousands of child soldiers fighting around the world; this verdict stands as a landmark in a fight against one of the world’s most serious crimes. It has been described as an “important step forward” in prosecuting crimes against children in armed conflict.

Keywords: litigation, international, International Criminal Court, child soldiers, United Nations, Thomas Lubanga

—Rohani Mahyera, J.D., Emory University School of Law 2012


March 30, 2012

Chinese Lawyers Must Swear Allegiance to Communist Party

On Wednesday, March 21, 2012, the Ministry of Justice in China posted a notice on its website requiring all first-time legal license applicants and current lawyers requesting renewals of their licenses to take an oath of loyalty to the country, the Communist Party, and the people of China. Translated into English, the oath stated in part, “I pledge to faithfully fulfill the sacred mission of a worker of the socialist system of laws with Chinese characteristics, be loyal to the homeland, loyal to the people, [and] support the leadership of the Communist Party of China.”

Proponents of the oath justify it by reasoning that it would raise the political, moral, and professional quality of lawyers. The ministry’s goal was to ensure that lawyers followed the values of “loyalty, devotion to the people, justice and probity.” Critics of the oath include legal reformers, who believe that the oath undermines the letter of law by placing the party and people first.

The oath is also viewed as a crackdown on human-rights lawyers, who are now forced to pledge allegiance to a party, rather than uphold the rights of their clients. It is a step toward curtailing the efforts of lawyers that challenge the political and legal system by which the party maintains its power. In the past, human-rights lawyers have been stopped by the government from taking sensitive cases that defend democracy or government critics through suspension or revocation of their licenses. However, the swearing of oaths was limited to lawyers’ associations with close ties to the party that required lawyers to swear oaths as a part of membership. However, these associations rarely represented the interests of lawyers. This is the first time all lawyers have been forced to pledge fealty to the Communist party.

Nonetheless, one lawyer remains passionate about his work, stating “to be honest, it is just a formality. It doesn’t affect our work.”

Keywords: litigation, international litigation, Chinese lawyers, oath, communist party, human rights lawyers

—Rohani Mahyera, J.D., Emory University School of Law 2012


March 22, 2012

Hong Kong's SFC Brings Civil Suits for Violations

In a ruling issued on February 23, 2012, the Hong Kong Court of Appeal found in favor of the Securities and Futures Commission for Chinese territories (SFC), allowing it to bring civil suits for securities violations. Sec. & Fut. Comm’n. v. Tiger Asia Mgmt., LLC, [2012] Legal Reference System (C.A.). As a result, the SFC now has more power to protect investors.

The SFC is an independent, nongovernmental, statutory body outside the civil service responsible for regulating securities in Hong Kong. It has the power to bring criminal proceedings for insider trading, market manipulation, and other, similar offenses. However, criminal prosecution is challenging for the SFC because nearly half of share-trading turnover comes from overseas investors, creating jurisdictional issues. Furthermore, almost one in four companies listed in Hong Kong is neither incorporated nor domiciled within the SFC jurisdiction. Because Hong Kong considers criminal and civil proceedings mutually exclusive, the high court’s ruling expands the SFC’s jurisdiction to include civil proceedings in an effort to further protect investors.

The ruling came about as a result of a suit filed by the SFC against the New York hedge fund Tiger Asia Management, LLC, alleging illegal market practices. Tiger Asia is accused of using insider information to reap almost $4.9 million in profits. Allegedly, it was trading on inside information provided by bankers arranging placements of the shares for Chinese companies China Construction Bank Corp. and Bank of China Ltd. in 2008 and 2009. However, the hedge fund does not have any employees or any presence in Hong Kong.

The lower court dismissed the SFC’s complaint, finding that the SFC could only bring such a suit after either a criminal conviction or authorization through an inquiry by the Market Misconduct Tribunal, a separate Hong Kong governmental body. However, a three-judge appellate panel struck the lower court’s ruling, finding that the SFC could independently seek civil remedies under section 213 of the Securities and Futures Ordinance, which allows the SFC to issue temporary restraining orders.

This suit is similar to several proceedings the SFC has attempted to initiate under section 213 against companies such as Hontex International Holdings Co. Ltd., China Forestry Holdings Co. Ltd., and Gome Electrical Appliance Holdings Ltd. According to Bloomberg, Tiger Asia plans to appeal the decision to the Hong Kong Court of Final Appeal, Hong Kong’s highest judicial body. However, for now, the SFC’s case against Tiger Asia will proceed as a civil charge.

Keywords: litigation, international litigation, securities, Hong Kong, Securities and Futures Commission, regulation, Tiger Asia Management

—Rohani Mahyera, J.D., Emory University School of Law 2012


March 13, 2012

The Nonrefoulement Principle and Extraterritoriality

In its unanimous judgment on February 23, 2012, the European Court of Human Rights found that, by sending Somalian and Eritrean migrants intercepted at sea back to Libya, Italy violated article 3 (the prohibition of inhuman or degrading treatment), article 4 of protocol no. 4 (the prohibition of collective expulsions), and article 13 (the right to an effective remedy) of the European Convention on Human Rights. The court also held that the applicants fell within the jurisdiction of Italy for the purposes of article 1 of the European Convention on Human Rights.

The applicants in the case were 11 Somalian and 13 Eritrean nationals who left Libya on boats bound for Italy with a group of approximately 200 people. On May 6, 2009, they were intercepted on the highs seas by Italian customs and coast guard vessels. The migrants were transferred to the Italian vessels and taken to Tripoli, Libya. The Italian authorities did not check their identities and did not tell them where they were being taken. In the Tripoli harbor, they were handed over to Libyan authorities.

The court has usually been reluctant to find that extraterritorial jurisdiction is within the meaning of article 1 of the convention, but in this case it couldn’t have gone around the well-established principle of international law that a vessel sailing on the high seas is subject to the exclusive jurisdiction of the state of the flag it was flying. Because the events had taken place on Italian military ships, carrying solely military personnel, the court could only conclude that the applicants were within the exclusive de facto and de jure jurisdiction of Italian authorities.

The court also found two violations of article 3. The first one was in relation to the risk of suffering ill treatment in Libya, and the second was the risk of suffering ill treatment in the migrants’ country of origin, namely Somalia and Eritrea. The court rejected the respondents’ arguments that Libya was a safe destination for migrants based on the international commitments it undertook regarding asylum and the protection of refugees. The court was well aware that merely being a signatory of human rights conventions does in no way guarantee compliance with their provisions. The amicus curiae briefs from the U.N. High Commissioner for Refugees (UNHCR), Human Rights Watch, and Amnesty International on the actual treatment of irregular migrants and asylum seekers in those countries assured the court that Italy acted in violation of article 3 and the nonrefoulement principle of international refugee law.

The most interesting thing about this case is that, for the first time, the court had to examine whether article 4 of protocol no. 4 applies to a case involving the removal of aliens to a third state carried out outside national territory. Namely, it had to examine whether the actions of the Italian authorities taken on the high seas could be qualified as collective expulsion within the meaning of article 4 of protocol no. 4. The court held that they did. In its analysis, the court observed that the notion of expulsion, like jurisdiction, is usually confined to a state’s territory, but in those instances where a state exercises its jurisdiction outside its territory, it is still bound by the convention and thus by the prohibition of collective expulsion.

Additionally, because the migrants were not able to lodge their complaints under article 3 of the convention and article 4 of protocol no. 4 with a competent authority and obtain a thorough and rigorous assessment of their requests before the removal measure was enforced, the court found that there had been a violation of article 13 taken in conjunction with article 3 and article 4 of protocol no. 4.

Keywords: litigation, international litigation, European Court of Human Rights, European Convention on Human Rights, nonrefoulement

—Milica Kostic, LL.M. candidate 2012, University of Michigan Law School


March 7, 2012

Ecuador and Chevron Keep at It; Others Join the Fray

Since the Second Circuit’s opinion on January 26, 2012, explaining its order vacating the New York District Court’s worldwide injunction barring enforcement of the $18 billion Ecuadorian judgment against Chevron (see Ecuador and Chevron Continue to Duke It Out), the ever-expanding legal saga has taken some dynamic turns. Here is a quick overview of the most recent developments.

Patton Boggs, LLP v. Chevron
On February 15, 2012, Patton Boggs, LLP, the law firm that represented the Ecuadorian plaintiffs in the dispute before the Second Circuit, sued Chevron in Federal District Court in New Jersey [PDF]. As detailed in Letters Blogatory:

The complaint is a fascinating read, because it draws together—from the plaintiffs’ perspective, of course—many of the threads of this complex case. The complaint is admirable, whatever its merits, because it tells a strong story that has a real equitable flavor.

. . .

The complaint asserts a claim against the $21.8 million bond Chevron posted as a condition of obtaining the preliminary injunction from Judge Kaplan. It also asserts a claim under New York law, which according to Patton Boggs allows recovery of fees “incurred in resisting, and attempting to have lifted, an unlawful restraint.” Finally, it asserts a claim for malicious prosecution.

Chevron v. The Republic of Ecuador
Back in 2009, before the $18 billion judgment was entered in Ecuador (the Lago Agrio litigation), Chevron commenced an arbitration proceeding in the Hague’s Permanent Court of Arbitration under the United States–Ecuador Bilateral Investment Treaty (BIT). Chevron asked the BIT tribunal to order Ecuador to halt the Lago Agrio litigation or agree to indemnify Chevron for any damages that might result from it. On February 16, 2012, the BIT tribunal issued a Second Interim Award [PDF] ordering Ecuador and all of its branches, including the judiciary, to prevent the enforcement and recognition of the $18 billion Lago Agrio litigation judgment, both inside and outside Ecuador. The award expands on a prior award [PDF] requiring Ecuador to “take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment.” Tribunal Determines Chevron’s Ecuador Arbitration May Proceed.

Maria Aguinda y Otros v. Chevron Appeal
The Ecuadorian courts are not backing down. In a decision made public on February 21, 2012, the appellate court said that the BIT tribunal had no authority to interfere with court proceedings in Ecuador. “A simple arbitral award . . . cannot force judges to infringe the human rights of our citizens,” said the court, adding that abiding by the BIT tribunal’s order would be unconstitutional and would lead to the breach of international human rights conventions. Counsel for the Ecuador plaintiffs responded by indicating that they will initiate steps to collect the judgment in courts throughout the world. Ecuador Court Rejects Chevron Arbitration Ruling.

Days later, on February 27, 2012, the BIT tribunal issued a more than 130-page award regarding its jurisdiction [PDF]. Tribunal Determines Chevron’s Ecuador Arbitration May Proceed.

Ecuadorian Plaintiffs’ OAS Petition
The Ecuadorian plaintiffs filed a petition [PDF] with the Inter-American Commission on Human Rights, an arm of the Organization of American States. The petition refers to the BIT arbitration and requests that the commission call for precautionary measures from Ecuador to take steps to protect the plaintiffs’ fundamental rights. The commission has asked for more information about the harms being suffered in Ecuador due to Chevron’s contamination.

The Outlook
Barring a settlement, resolution is years away. There will be more to come. Next move: Most likely, the plaintiffs are seeking to have the $18 billion judgment recognized by a court outside of Ecuador—rumors indicate Panama, Venezuela.

Keywords: litigation, international litigation, Ecuador, Chevron, anti-enforcement suits

—J. Chad Mitchell, Summit Law Group, Seattle, Washington


February 22, 2012

ECJ Rules Against Filters to Prevent Illegal Trading

The European Court of Justice (ECJ), based in Luxembourg, ruled on Thursday, February 16, 2012, that social networking sites cannot be compelled to install general filters that prevent the illegal trading of music and copyrighted material. Case C-360/10, Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (SABAM) v. Netlog NV (Feb. 16, 2012). The decision was issued in the wake of protests growing against the proposed international Anti-Counterfeiting Trade Agreement (ACTA), which is designed to protect intellectual property rights. Many technologists have feared that such legislation is far too heavy-handed in its attempts to combat piracy.

The ruling results from a lawsuit filed by the Belgian company SABAM, which represents authors, composers, and music publishers, against Netlog, an online social network. Such networking sites, including Facebook, Twitter, and YouTube, base their business models on the sharing of users’ views and information. Netlog allows users to create personal profiles through which they keep a diary, link with their friends, and share copyrighted works. Netlog users are able to conduct this activity without SABAM’s permission or payment of a fee.

The original suit was brought in a Belgian court that sought the ECJ’s advice on the matter. SABAM objected to practices by social networking sites, saying users’ profiles allowed protected works to be shared illegally, and wanted the sites to install filters to stop the sharing of copyrighted material among users. The court found that such filters did not sufficiently protect personal data or the freedom to receive and impart information, and the filters would infringe a company’s freedom to conduct its business because it would have to install the complicated filter system at its own expense.

This decision is a second blow to SABAM in the past year. It lost a separate case in November seeking to require Internet service providers to install filters preventing the illegal downloading of files. The Thursday ruling is also a setback for content owners fighting to protect their work from circulating freely on the Internet, and it demonstrates how difficult it can be to protect intellectual property.

Keywords: litigation, international litigation, social networking, Netlog, SABAM, copyrighted works, Internet filters, ECJ, piracy

—Rohani Mahyera, J.D., Emory University School of Law 2012


February 10, 2012

China Loses WTO Appeal on Exports of Raw Materials

The World Trade Organization’s (WTO) appellate panel, on January 30, 2012, ruled against China’s attempt to limit its export of raw materials. Panel Report, China—Measures Related to the Exportation of Various Raw Materials, WT/DS394/R (Jan. 30, 2012). The raw materials at issue are used in steel and chemical industries, and China is a leading producer of the materials. Since 2001, China has been under pressure to retain these raw materials for domestic needs. Although China pledged to scrap export controls when it joined the WTO, Beijing has slowly limited exports of the raw materials, claiming it needs to conserve some materials and limit the environmental impact from the production of others. China has similarly restrained trade for other elements (rare earths) that are key to the production of high-tech products. The January decision of the WTO panel regarding the raw materials has given consumers such as the United States and Europe leverage to use against China’s limits on the rare-earth exports, although such exports are not an explicit part of the appellate ruling.

The case originated with the WTO in June 2009, when the United States requested consultations with China regarding China’s restraints on the export of different forms of raw materials. A month later, the European Communities, Canada, Mexico, and Turkey requested to join the consultations. China accepted the consultations, and in November 2009, the United States requested the establishment of a panel, which subsequently examined the dispute. The complainants argued that China’s restrictions created scarcity, giving it an unfair advantage because it kept the prices of domestic raw materials low in China compared to other parts of the world.

The original WTO panel held that the Chinese export duties (taxes) and quota for certain industrial minerals violated the WTO requirements. China appealed the panel report, and lost again in the January decision. Specifically, the complainants had challenged four types of export restraints imposed on the different raw materials: export duties, export quotas, minimum export price requirements, and export licensing requirements. The appellate panel overruled the original panel’s findings on minimum export price requirements and export licensing requirements; however, it examined the “series of measures” China took to impose export quotas and duties on the exports, including the framework legislation, the regulations implementing this legislation, and the specific legal instrument or instruments identifying the individual export quotas or duties imposed in 2009. The WTO appellate panel found that China’s export duties and export quotas on raw materials violated the global trade rules.

China’s arguments in favor of its restraints did not justify them. For instance, under the WTO rules, countries can restrict exports for the purpose of protecting the environment when the restrictions are accompanied with limits on domestic production and/or consumption of the materials. However, China did not successfully justify any restrictions based on environmental impact, as it did not place similar restrictions on consumption or production of raw materials domestically. Additionally, certain justifications for export duties were unavailable to China because of its accession to the WTO, and it was unable to demonstrate that its export quota for certain raw materials was temporarily applied to prevent or relieve a “critical shortage.” Thus, China was ordered to bring its export duty and quota measures in conformity with its WTO obligations.

The ruling could ease the exports of the rare materials, as China has committed to eliminate restrictions on the “right of trade.” Additionally, because China is the leading exporter of such raw materials, it would hurt its own economic interest by continuing to restrict exports. Also, this decision generally makes it harder for global exporters to withhold supplies and levels the global trade playing field. Nevertheless, to what extent China will actually comply with the WTO ruling remains to be seen.

Keywords: litigation, international litigation, World Trade Organization, China, global trading, raw materials, international trade

—Rohani Mahyera, J.D., Emory University School of Law 2012


February 7, 2012

ICTR Delivers Judgment in Ngirumpatse, Karemera Case

At the start of its closing year, the International Criminal Tribunal for Rwanda (ICTR) delivered its judgment in the case of Mathieu Ngirumpatse, former president of the National Republican Movement for Democracy and Development (MRND)—the ruling political party of Rwanda from 1975 to 1994, and Edouard Karemera, former vice president of the MRND and later the Minister of the Interior for the interim government. The two former high-ranking government officials were found guilty of conspiracy to commit genocide, direct and public incitement to commit genocide, genocide, rape, and extermination as crimes against humanity, along with serious violations of Article 3 common to the Geneva Conventions and Additional Protocol II. However, on the basis of the principles relating to cumulative convictions, the count of conspiracy to commit genocide did not enter the conviction; conspiracy to commit genocide is implied in the conviction for genocide. They have both been sentenced to life imprisonment.

This is the tribunal’s 61st conviction, along with 93 indictments, 83 arrests, 10 acquittals and 9 fugitives still at large. After some 17 years since its establishment, the Rwandan tribunal is on the verge of concluding an important phase of its mandate—the completion of all trials at first instance, set for June 2012.

The work begun by the ICTR will be continued and finished by the International Residual Mechanism for Criminal Tribunals, established by Security Council Resolution 1966 (2010). The Residual Mechanism “shall continue the jurisdiction, rights and obligations and essential functions of the ICTY [International Criminal Tribunal for the former Yugoslavia] and the ICTR.” Paragraph 4 of the UNSCR 1966. It will have two branches corresponding to the two tribunals. The ICTR, or Arusha Branch of the Residual Mechanism, will also be the home of the ICTR archives. These archives will hold the nearly 900,000 pages of transcripts and audio and video recordings of more than 6,000 trial days, as well as more than 10,000 interlocutory decisions and the judgments of all persons accused at the tribunal.

Keywords: litigation, international litigation, Karemera, Ngirumpatse, Rwanda, International Criminal Tribunal for Rwanda, International Residual Mechanism for Criminal Tribunals

—Milica Kostic, LL.M. candidate 2012, University of Michigan Law School


January 31, 2012

Second Circuit Puts End to Chevron's Worldwide Injunction

On January 26, 2012, the Second Circuit issued a 30-page opinion explaining why, in September 2011, it issued an order vacating Chevron’s worldwide injunction barring the recognition and enforcement of the roughly $18 billion Ecuadorian judgment against Chevron.

Nearly a year earlier, the district court had issued a preliminary injunction prohibiting the Ecuadorian plaintiffs from enforcing anywhere outside of Ecuador, a move that was, at that time, a potential Ecuadorian judgment against Chevron. In vacating that preliminary injunction, the Second Circuit determined that injunctive relief by Chevron (the judgment debtor) was not allowed under New York’s Uniform Foreign Country Money-Judgments Recognition Act, N.Y. C.P.L.R. §§ 5301–5309, international comity, or the Declaratory Judgment Act.

Putting aside the substance of Chevron’s attacks on the fairness of the Ecuadorian proceedings, the Second Circuit reasoned that the Recognition Act did not authorize Chevron’s preemptive strike seeking to have a foreign-country judgment declared unenforceable:

Whatever the merits of Chevron’s complaints about the Ecuadorian courts, however, the procedural device it has chosen to present those claims is simply unavailable: The Recognition Act nowhere authorizes a court to declare a foreign judgment unenforceable on the preemptive suit of a putative judgment-debtor.

January 26, 2012 Opinion at 16. The Second Circuit also relied on international comity to support its holding that the worldwide injunction could not stand. As I promptly tweeted after the Second Circuit vacated the district court’s ruling, “enjoining enforcement worldwide - that is a stretch.” https://twitter.com/jChadMitchell, September 20, 2011. The Second Circuit saw it that way too, articulating concerns of a “court in one country attempt[ing] to preclude the courts of every other nation from ever considering the effect of that foreign judgment.”

In such an instance, the court risks disrespecting the legal system not only of the country in which the judgment was issued, but also those of other countries, who are inherently assumed insufficiently trustworthy to recognize what is asserted to be the extreme incapacity of the legal system from which the judgment emanates. The court presuming to issue such an injunction sets itself up as the definitive international arbiter of the fairness and integrity of the world’s legal systems.

January 26, 2012 Opinion at 23.

Lastly, the Second Circuit explained that because the Recognition Act did not provide a legal predicate for injunctive relief, the Declaratory Judgment Act could not be used to expand the statute’s authority to do so. And with that, the Second Circuit put an end to Chevron’s injunction and sounded the death knell for anti-enforcement suits—at least in the Second Circuit.

Keywords: litigation, international litigation, Ecuador, anti-enforcement suits

—J. Chad Mitchell, Summit Law Group, Seattle, Washington


January 26, 2012

Ecuador and Chevron Continue to Duke it Out

Litigation continues after an Ecuadorian appeals court affirmed an $18 billion judgment against Chevron, mentioned the International Litigation Committee’s January 5, 2012, News & Developments. An English translation of the appellate decision can be found here [PDF].

Since then:

  • New York District Court Judge Lewis Kaplan rejected Chevron’s request for an attachment order seeking the attachment of assets of the Ecuadorian plaintiffs so that, once successful on its claims in New York, Chevron would have secured assets to satisfy any damages awarded. January 6, 2012 Memorandum Opinion.
  • The Second Circuit rejected Chevron’s motion to argue the issues again and vacate its prior ruling vacating Judge Kaplan’s ruling that the Ecuadorian plaintiffs were enjoined from attempting to have recognized or enforced the $18 billion Ecuadorian judgment anywhere in the world (other than Ecuador). January 19, 2012 Order. It appears that there was more to the Second Circuit’s prior ruling than just the ripeness.


The Bilateral Investment Treaty arbitration between Ecuador and Chevron may be Chevron’s best hope to stop the $18 billion judgment from becoming final, recognizable, and enforceable. Chevron recently explained some of its strategy in a press release announcing Chevron’s decision to appeal the $18 billion judgment to Ecuador’s National Court of Justice. Chevron explained in its press release:

Based on the [arbitral] Tribunal’s order, Chevron has asked that the Ecuadorian [intermediate] appellate court take all steps to suspend enforcement of the Lago Agrio judgment until further order of the Tribunal, including suspension of any requirement that Chevron post a bond to prevent enforcement of the judgment during the [current appeal]. Any demand that Chevron post a bond in this case would be a violation of Ecuador’s international obligations under the order of the [Bilateral Investment Treaty] Tribunal, and Chevron has no obligation to post such a bond.

With $18 billion at stake, there will be much more to come. Stay tuned.

Keywords: litigation, international litigation, Ecuador, anti-enforcement suits

—J. Chad Mitchell, Summit Law Group, Seattle, Washington


January 25, 2012

India's Supreme Court Found Vodafone Not Liable for Taxes

In an opinion issued on January 20, 2012, the Supreme Court of India overturned the Mumbai High Court’s 2010 decision and held British telecom giant Vodafone not liable to the Indian government for $4.4 billion in back taxes and penalties arising from Vodafone’s acquisition of a 67 percent stake in CGP Investments, Ltd., a Cayman Islands company that held Indian telecom assets of the Chinese company Hutchison Telecommunications. Vodafone I nt’l Holdings B.V. v. Union of India & Anr., (2012), Civil Appeal No. 733.

The acquisition occurred in 2007 and took place in the Cayman Islands. Nevertheless, the Mumbai High Court found that the Indian government had jurisdiction over the transaction because it involved an indirect transfer of Indian assets that accrued revenue in India. As a result, in 2010, the court found Vodafone liable to the Indian government for $2.2 billion in taxes and interest and up to 100 percent of the taxes in penalties. Vodafone argued that it did not owe the Indian government any taxes, as the transaction took place between two foreign entities. Vodafone appealed the decision, and, in 2012, the Supreme Court of India overturned the lower court, finding in favor of Vodafone. The Court held that Indian authorities did not have jurisdiction over a transaction involving foreign-incorporated companies and absolved Vodafone of all tax liability for the transaction. The Court also said it would refund the $496 million deposit (with interest) Vodafone made in anticipation of the tax bill and compliance with an interim order in November 2010.

This holding has broad implications for companies such as GE, SAB Miller, Cadbury, AT&T, Sanofi, and Vedanta, who are currently fighting tax-related cases in India and international investors who feared the implications of the Vodafone precedent. This decision could potentially relieve such companies and investors of future tax liabilities when they face similar tax investigations in India, restoring their faith in the Indian business market and clarifying India’s current tax laws. However, any lasting effect of this decision may be short-lived; in 2013, India’s new tax code is due to be implemented, and it is designed to make companies like Vodafone liable to India for taxes resulting from such foreign transactions.

Keywords: litigation, international litigation, international tax liability, India Tax Code, foreign investments, telecommunications

—Rohani Mahyera, J.D., Emory University School of Law 2012


January 10, 2012

Swiss Bankers Charged with Helping Americans Evade IRS

On January 3, 2012, U.S. authorities in New York charged three Swiss bankers with conspiring with wealthy American taxpayers and helping them hide more than $1.2 billion in assets from the Internal Revenue Service (IRS) in their Swiss bank accounts. U.S. v. Berlinka, No. 1:12-CR-00002-JSR (S.D.N.Y. Jan. 3, 2012).

According to federal prosecutors in Manhattan, the three Swiss bankers, identified as Michael Berlinka, Urs Frei, and Roger Keller, allegedly engaged in this tax-evasion conspiracy with American taxpayers in an attempt to gain the business that UBS AG and another Swiss Bank lost. UBS lost business after news reports surfaced of U.S. government investigations into its undeclared bank accounts. In 2009, UBS defrauded the U.S. government of billions of dollars in taxes and, to avoid criminal charges, turned over the names of 4,000 U.S. account holders to the U.S. government and paid a $780 million fine.

In the wake of the UBS investigation, in 2008 and 2009, the three Swiss bankers opened and serviced undeclared bank accounts for U.S. taxpayers to hide their assets from the IRS. To avoid detection by the U.S. government, the bankers used the names of offshore sham corporations and foundations to open the accounts and occasionally communicated with the taxpayers using personal rather than business email accounts. The bankers worked for Wegelin & Co. from the bank’s Zurich office; however, the indictment filed against them does not identify Wegelin or any coconspirators.

The bankers currently live in Switzerland. The U.S. federal government may convict them for a maximum prison term of five years for conspiracy.

Keywords: litigation, international litigation, tax evasion, Swiss banks, offshore accounts, conspiracy

—Rohani Mahyera, J.D., Emory University School of Law 2012


January 5, 2012

$18B Judgment Against Chevron Upheld on Appeal in Ecuador

Chevron’s saga with the Ecuador legal system continues. Chevron appealed the February 14, 2011, ruling by a trial court in Ecuador that awarded roughly $18 billion in various damages allegedly caused by wastewater spilled in the Amazon River basin years ago. A three-judge appellate court in Ecuador affirmed the trial court’s decision.

In an aggressive and unique maneuver, Chevron sought an injunction from U.S. courts to prevent the enforcement of the $18 billion judgment—an anti-enforcement suit. Even on February 8, 2011, before the Ecuadorian trial court’s judgment, Chevron had in hand a temporary restraining order from the Federal District Court in the Southern District of New York restricting the Ecuadorian plaintiffs and their agents from seeking the enforcement or the recognition of any Ecuadorian judgment anywhere in the world, other than Ecuador. In March 2011, the district court issued a similar preliminary injunction. Chevron Corp. v. Donziger, 768 F.Supp.2d 581 (S.D.N.Y. 2011).

In the fall of 2011, the U.S. Court of Appeals for the Second Circuit vacated the preliminary injunction, Naranjo v. Chevron Corp., 2011 WL 4375022 (2d. Cir. Sept. 19, 2011), but it has not yet issued an opinion setting forth its reasoning. That opinion will have a significant impact on the viability of anti-enforcement suits going forward.

Keywords: litigation, international litigation, Ecuador, anti-enforcement suits

J. Chad Mitchell, Summit Law Group, Seattle, Washington


December 12, 2011

Singapore Surges as Choice for International Arbitration

In a Financier Worldwide interview, Nish Shetty (Clifford Chance, LLP), Randolph Khoo (Drew & Napier, LLC), and Richard Chalk (Freshfields Bruckhaus Deringer, LLP) talk about the recent growth seen in arbitrations seated in Singapore, what is driving this growth, and what international practitioners should know about the advantages to arbitrating disputes in Singapore. The panel also discusses the important role that the Singapore courts and legislature play in making and keeping Singapore a hot destination for international disputes.

Keywords: litigation, international, Singapore, arbitration

J. Chad Mitchell, Summit Law Group, Seattle, Washington


October 19, 2011

Ninth Circuit Expands Jurisdiction over Foreign Companies

On May 18, 2011, the Ninth Circuit issued its decision in Bauman et al. v. DaimlerChrysler Corp. et al., ___ F.3d ___, 2011 WL 1879210, a potentially transformative case that expands the use of “agency theory” to impose general jurisdiction over foreign corporations that do business in the United States solely through their U.S. subsidiaries. The Ninth Circuit held that personal jurisdiction existed over DaimlerChrysler Aktiengellschaft (DCAG), a German company, because DCAG maintained the right to control its wholly owned U.S. subsidiary, Mercedes-Benz USA, LLC (MBUSA), such that DCAG could be haled into court in California due to MBUSA’s contacts with that state. Notably, the Bauman decision subjected DCAG to California’s jurisdiction despite the fact that the events giving rise to the lawsuit did not take place in the United States or involve the contacts relied on by the court in exercising general jurisdiction over DCAG in the first place.

Bauman is significant and merits attention because it increases the likelihood that foreign corporations will be sued in American courts based on the activities of their U.S. subsidiaries. Use of the “agency test” to establish general jurisdiction over foreign companies with U.S. subsidiaries makes every foreign corporation potentially vulnerable to lawsuits in America, even on issues having nothing to do with the actions or activities of the U.S. subsidiary.

Bauman’s reach, however, may be curtailed depending on how courts apply the U.S. Supreme Court’s recent decision in Goodyear Dunlop Tires S.A. v. Brown, 564 U.S. ___ (June 27, 2011). Whether Goodyear will be used as a scalpel or a sledgehammer with respect to Bauman remains to be seen, as DaimlerChrysler filed a petition for a rehearing en banc before the Ninth Circuit in early July. Given the uncertainty of whether the Goodyear decision undermines Bauman, foreign companies should still tread carefully if they, or their subsidiaries, act within the United States.

Keywords: litigation, international litigation, agency theory, subsidiaries, jurisdiction

—Mildred Segura, partner, and Nabil A. Bisharat, associate, Reed Smith, LLP, Los Angeles, California


October 6, 2011

ICC Prosecutor Requests an Arrest Warrant for Gaddafi

On May 16, 2011, the International Criminal Court (ICC) prosecutor asked the Pre-Trial Chamber to issue arrest warrants for Libyan leader Muammar Gaddafi, his son Seif al-Islam, and Abdullah Sanussi, Libyan Intelligence chief for crimes against humanity.

On February 26, 2011, the ICC gained jurisdiction of the case when the U.N. Security Council unanimously referred Libya to the ICC through resolution 1970. Based on the referral, the ICC has had ongoing jurisdiction over war crimes and crimes against humanity committed on the territory of Libya since February 15, 2011. This was the first time the U.N. Security Council unanimously referred a situation to the ICC and only the second time it has given jurisdiction to the ICC over a non-state party. In 2005, the Security Council referred the situation in Darfur to the ICC. China and the United States abstained from the vote.

It is now up to a panel of three judges of the ICC’s Pre-Trial Chamber to determine if there are “reasonable grounds to believe” that Gaddafi et al. have committed the alleged crimes and issue an arrest warrant.

If the ICC grants the arrest warrant, Gaddafi will be yet another head of state who has had an arrest warrant issued against him for serious international crimes before an international tribunal. In 1999, the International Criminal Tribunal for Yugoslavia issued its first arrest warrant against Yugoslav President Slobodan Milosevic for crimes stemming from the war in Kosovo; subsequent arrest warrants were issued for crimes allegedly committed during the wars in Bosnia and Croatia. In 2003, the Special Court for Sierra Leone issued an arrest warrant for Charles Taylor, then president of Liberia, for crimes in Sierra Leone. Most recently, the ICC issued arrest warrants for Sudanese President Omar al-Bashir on charges of genocide, crimes against humanity, and war crimes. Without their own police force, international tribunals like the ICC rely on cooperation from states to enforce their arrest warrants. At this writing, President Bashir had not yet been arrested.

Keywords: litigation, international litigation, Libya, Muammar Gaddafi, International Criminal Court, arrest warrant

—Jeff Locke, director of Disputes and Investigations, Navigant, Inc., New York, New York

Navigant is a sponsor of the Section of Litigation, and this article appears in connection with the Section's sponsorship agreement with Navigant. Neither the ABA nor ABA sections endorse non-ABA products or services.


August 19, 2011

England Looks Beyond Jurisdiction, State Immunity

The decision of the English Supreme Court in NML Capital Ltd v Republic of Argentina [2011] UKSC 31 makes it easier to enforce foreign judgments against foreign states.

The effect of the decision is that the English courts must look at the circumstances in which the foreign judgment was obtained, such as whether or not the claim arose out of commercial dealings or other acta res gestionis (nonsovereign acts) as opposed to acta jure imperii (sovereign acts, such as running an army), rather than just the technicalities of whether the foreign court had jurisdiction according to English private international law rules (including questions of state immunity).

Keywords: litigation, international litigation, England, foreign judgments, state immunity

Steven Loble, Finers Stephens Innocent, LLP, London, England


February 14, 2011

Charles Taylor, Defense Lawyer Walk Out Prior to Closing Argument

The Special Court of Sierra Leone’s case against Charles Taylor, the former president of Liberia, was halted after Taylor and his attorney, Courtenay Griffiths, walked out of the courtroom prior to the defense’s closing argument and refused to return.

The February 8, 2011 walkout followed the trial chamber’s rejection of the defense’s 547-page case summary of the trial because it was filed 20 days too late. It is worth noting that the trial chamber had warned the defense counsel repeatedly of the consequences of missing the deadline. The trial chamber has since granted an interlocutory appeal on the issue. It will likely be several weeks until the appeal is decided and the case can proceed.

In many international tribunals, the prosecution and the defense can submit case summaries, which present their respective analysis of the evidence heard at trial. The prosecution already submitted its case summary.

Taylor was originally indicted under seal March 7, 2003, to 11 charges of war crimes and crimes against humanity for allegedly partaking in Sierra Leone’s civil war. He allegedly helped rebels in return for blood diamonds, which he later sold on the black market. Taylor was arrested and transferred to the Special Court of Sierra Leone on March 29, 2006. He has pled not guilty to the charges.

The prosecution opened its case on June 4, 2007, but witness testimony did not start until January 7, 2008, because Taylor dismissed his legal team and new counsel had to be appointed. The prosecution formally closed its case on February 27, 2009. The defense opened its case on July 13, 2009, and concluded it on November 12, 2010.

The landmark case is the first international prosecution of a former African head of state.

— Jeffrey Locke, Navigant Consulting

Navigant is a sponsor of the Section of Litigation, and this article appears in connection with the Section’s sponsorship agreement with Navigant. Neither the ABA nor ABA sections endorse non-ABA products or services.

Keywords: litigation, international litigation, insolvency exception, foreign judgments, England


February 3, 2011

The Insolvency Exception to Enforcing Foreign Judgments in England

In David Rubin et al. v. Euro Finance SA et al., [2010] EWCA Civ 895 (English Court of Appeal), the court recognized an exception to the traditional rule precluding the enforcement of foreign judgments if the issuing court lacked personal (or in personam) jurisdiction over the defendant, holding that “[t]he ordinary rules for enforcing, or more precisely not enforcing, foreign judgments in personam do not apply to bankruptcy proceedings.”

As cross-border transactions become increasingly common, it is no surprise that efforts to enforce cross-border judgments have increased as well. One of the biggest issues in enforcing such judgments has been whether the court issuing the judgment had personal (or in personam) jurisdiction over the judgment debtor.

Following Rubin, care should be taken by the office holder (trustee in bankruptcy, liquidator, administrator, or similar) when seeking to enforce judgments of foreign courts in England. Similarly, English defendants should be careful when assessing whether a foreign judgment might be enforced against them and choose to ignore foreign bankruptcy proceedings at their own peril.

Keywords: litigation, international litigation, insolvency exception, foreign judgments, England

Steven Loble, Finers Stephens Innocent, LLP, London, England


December 17, 2010

Court Applies Functional Test to Request for Discovery Assistance

The U.S. District Court for the Southern District of Florida has applied a “functional test” in determining that discovery assistance under 28 U.S.C. § 1782 may be afforded to a private international arbitration. In re Winning (HK) Shipping Co, Ltd., 2010 U.S. Dist. Lexis 54290 (S.D. Fla. 2010) involves an unsuccessful motion to quash an ex parte order granting an application for section 1782 assistance. The section 1782 request was brought by Winning (HK) Shipping Co., Ltd., which sought discovery from Ystwyth Marine, Ltd., in anticipation of international arbitration proceedings that the petitioner anticipated bringing against the respondent in London.

The petitioner was a British Virgin Islands entity that had engaged the respondent, a Liberian company, to transport cargo that was lost at sea as a consequence of a maritime accident. The vessel involved in the incident was owned by the respondent and managed by Ship Management Services, an entity located in Florida and the target of the petitioner’s section 1782 request for documents and deposition testimony. The underlying cargo transport contract between the petitioner and the respondent called for the application of English law in an arbitration that was to take place in London pursuant to the rules of the London Maritime Arbitrators Association (LMAA).

The threshold issue resolved by the court was whether the anticipated London arbitration qualified as a “foreign or international tribunal” for which discovery assistance might be available under section 1782. In concluding that the contemplated arbitration did qualify, the Winning court juxtaposed ambiguities in the U.S. Supreme Court’s opinion in Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 124 S. Ct. 2466 (2004) against earlier circuit court holdings—in Nat’l Broadcasting Co., Inc. v. Bear Stearns & Co., Inc., 165 F.3d 184 (2nd Cir. 1999) and Republic of Kazakhstan v. Biedermann International, 168 F.3d 880 (5th Cir. 1999)—that private arbitrations do not constitute “tribunals” for which U.S. discovery assistance is available. Although it recognized that Intel does not specifically resolve the question of whether private arbitrations may be “tribunals” under section 1782, the Winning court concluded that Intel “opened the door” to a broader interpretation of the statute, in a departure from the NBC and Biedermann decisions. Following a survey of multiple conflicting cases following Intel, the Winning court determined that the resolution of whether a particular arbitration qualifies as a “tribunal” depends on an assessment of the function or role such a proceeding plays in the broader legal system of the foreign jurisdiction. An arbitral body that “actually acts as a first-instance decision maker whose decisions are subject to judicial review . . . operates as a foreign tribunal for purposes of section 1782” (i.e., a functional analysis test).

The Winning court concluded that an application of the functional analysis test supported a determination that an arbitration under the LMAA in London was a section 1782 “foreign or international tribunal” because the LMAA rules and the English Arbitration Act of 1996 provided for a substantive review in English courts of any resulting arbitral award—a right that the parties had not waived. In so holding, the court noted the emphasis in the Intel opinion on the availability of court recourse from the determinations of the administrative body that was deemed in Intel to be a section 1782 “tribunal.” The court further justified its conclusion by noting that the NBC and Biederman opinions do not indicate that the arbitrations in question would be subject to court review. Having determined that the London arbitration was the type of foreign proceeding to which U.S. discovery assistance might be afforded, the court then applied the discretionary factors identified in Intel to conclude ultimately that the section 1782 petition had in fact been properly granted.

— Gustavo J. Lamelas, Squire, Sanders & Dempsey, LLP, Miami, Florida


November 3, 2010

World Justice Project Survey Ranks U.S. Rule of Law at Bottom

Complaints about the high cost and inefficiency of litigation in the United States are not new, nor are they in short supply. Well, the World Justice Project’s Rule of Law Survey 2010 provides more fodder for these complaints. The study compared the rule of law in 35 countries based on a host of factors. Of particular interest is the “Access to Civil Justice” factor, which the study said “requires that the system be affordable, effective, impartial, and culturally competent.” Survey at 12. In the North American and Western Europe region, the U.S. ranked seventh out of seven countries. When grouped by income level (high), the United States ranked last again—11th out of 11 countries.

Access to Civil Justice (Country & Region)
1. Singapore, East Asia & Pacific
2. Sweden, Western Europe & North America
3. Netherlands, Western Europe & North America
4. Austria, Western Europe & North America
5. South Korea, East Asia & Pacific
6. Australia, East Asia & Pacific
7. Spain, Western Europe & North America
8. Canada, Western Europe & North America
9. France, Western Europe & North America
10. Japan, East Asia & Pacific
11. United States, Western Europe & North America

My first reaction was that the civil/code-based countries would fare better than the common-law ones. A look at the list shows that this is generally true, other than one significant exception: Singapore, a common-law jurisdiction, earned the highest ranking.

While not advocating that the United States transition away from the common-law system—I would never live that down among my continental colleagues—there are certain adaptations to consider. For example, reigning in U.S.-style discovery would certainly reduce costs and the time to resolution, which would be a great improvement in affordability and effectiveness.

Some civil-law concepts aren’t all that foreign—like offering direct testimony through witness statements, or foregoing rogatory letters and regional trade agreements, which, in my experience, add very little other than more paper to the file and more hours to the client. The IBA’s Rules for Taking of Evidence provide a good starting point for those less familiar with the civil-law system.

Just because the common-law system doesn’t seem to be working all that well in the United States, it doesn’t mean that it isn’t working well in other counties. While I know very little about Singapore’s legal system (other than it recently allowed for the entry of foreign law firms), I need to learn more and see what might prove helpful to solving some of the problems that we see here in the United States. And I probably need to do that pretty quickly, before the U.S. lawyers leave their mark in Singapore.

J. Chad Mitchell, Summit Law Group, Seattle, Washington


Third Circuit Only Grants Limited Immunity under IOIA

On August 16, 2010, the Third Circuit Court of Appeals broke with the oft-followed interpretation of Atkinson v. Inter-American Development, 156 F.3d 1335, (D.C.Cir. 1998) employed by the U.S. Court of Appeals for the District of Columbia and held that the International Organizations Immunities Act (IOIA) does not grant absolute immunity, but instead grants limited immunity consistent with the contemporary understanding and application of the Foreign Sovereign Immunities Act (FSIA). See OSS Nokalva, Inc. v. European Space Agency, 2010 WL 3211121, at *3.

The case came to the court under the collateral order doctrine on appeal from the district court’s order denying the European Space Agency’s (ESA) motion to dismiss the breach of contract claims of OSS Nokalva, Inc. (OSSN). In its motion to dismiss, ESA had asserted absolute immunity from suit under IOIA based on its status as an international organization.

The court affirmed the decision to deny the motion to dismiss, but disagreed with the district court’s findings regarding absolute immunity. In conducting its own analysis of IOIA, the court applied the common reference statute cannon that “[a] statute which refers to a subject generally adopts the law on the subject as of the time the law is enacted,” including “all the amendments and modifications of the law subsequent to the time the reference statute was enacted.” Id. at *5. The court noted that Congress had not included any language to convey the intent that IOIA be tethered to the law of foreign sovereign immunity as it existed in 1945, and on a policy note, the court called attention to the fact that allowing international organizations to enjoy absolute immunity while foreign sovereigns were subject to the immunity limitations in FSIA could create an incentive for foreign governments to evade legal obligations by acting through international organizations. In the end, the court saw no compelling reason why a group of states acting through an international organization is entitled to broader immunity than its member states enjoy when acting alone, and concluded that ESA was not entitled to absolute immunity.

— Kristi Schubert, Potter Anderson & Corroon, LLP, Wilmington, Delaware


Rules of Forum State Determine CISG Question in Third Circuit Case

In Forestal Guarani S.A. v. Daros Int'l, Inc. the U.S. Court of Appeals' Third Circuit recently determined that where one party's country of incorporation has made a declaration opting out of the provision of the U.N. Convention on Contracts for the International Sale of Goods (CISG), allowing a contract to be proved even if it is not in writing, and the other party's country of incorporation has not, a court must first decide, based on the forum state's choice-of-law rules, which forum's law applies and then apply the law of the forum designated by that choice-of-law analysis to determine whether a contract must be in writing.

Where the question of whether a breach-of-contract claim is sustainable in the absence of a written contract is not expressly settled, CISG Article 7(2) tells courts to settle the question in conformity with the general principles of CISG or, in the absence of such applicable principles, in conformity with the law applicable "by virtue of the rules of private international law." The court interpreted this to mean that the choice-of-law rules of the forum state must be applied.

—Kristi Schubert, Potter Anderson & Corroon, LLP, Wilmington, Delaware


Supreme Court Leaves Contract Dispute to Arbitrators in 5-to-4 Ruling

In Rent-A-Center West, Inc. v. Jackson, the U.S. Supreme Court, in a 5-to-4 ruling, made it harder to challenge an arbitral agreement in court, holding that if the contract explicitly delegates that issue to the arbitrators and a person fails to challenge that "delegation" clause specifically, the arbitrators, and not a court, are to decide whether the arbitral agreement is "unconscionable." In so holding, the Court relied on, and reaffirmed, some of its previous decisions, including Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967) and Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), both of which involved similar issues concerning the enforceability of arbitration agreements.

The Jackson holding is likely to have an impact on the drafting of arbitration agreements in the future. In particular, parties seeking to have their disputes be subject to arbitration will likely seek to insert language similar to that of the delegation provision at issue in Jackson to minimize the chances of a court deciding the enforceability of their arbitration agreements in the first instance.

Separately, the Jackson ruling will likely further fuel the debate concerning Congress' potential passage of the Arbitration Fairness Act (AFA), which would seek to exclude employment disputes (among other types of disputes) from the scope of the FAA. Those in favor of the AFA regarding employment disputes argue that arbitrations are stacked in favor of employers due to potential bias on the part of arbitrators, that some employees might be dissuaded from bringing claims against employers due to the fees and costs associated with arbitration, and that many employees are unfairly "forced" to accept arbitration agreements as a condition of their employment. The Jackson ruling may embolden these advocates, who may point to the ruling as further indicia of the obstacles employees face in bringing claims against employers and who assert that a court, a opposed to an arbitral tribunal, should be empowered to make the threshold determination about whether an arbitration agreement is "unconscionable."

—Douglas J. Giuliano and M. Cristina Cárdenas, Astigarraga Davis Mullins & Grossman, P.A., Miami, Florida