Quiz 31: International Law in a Global Economy

ISSUE SPOTTERS Café Rojo, Ltd., an Ecuadoran firm, agrees to sell coffee beans to Dark Roast Coffee Company, a U.S. firm. Dark Roast accepts the beans but refuses to pay. Café Rojo sues Dark Roast in an Ecuadoran court and is awarded damages, but Dark Roast's assets are in the United States. Under what circumstances would a U.S. court enforce the judgment of the Ecuadoran court? (See pages 714-715.)

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is the principle of comity, and why do courts deciding disputes involving a foreign law or judicial decree apply this principle?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What is the principle of comity, and why do courts deciding disputes involving a foreign law or judicial decree apply this principle?

Letters of Credit. The Swiss Credit Bank issued a letter of credit in favor of Antex Industries to cover the sale of 92,000 electronic integrated circuits manufactured by Electronic Arrays. The letter of credit specified that the chips would be transported to Tokyo by ship. Antex shipped the circuits by air. Payment on the letter of credit was dishonored because the shipment by air did not fulfill the precise terms of the letter of credit. Should a court compel payment? Explain.

Robco, Inc., was a Florida arms dealer. The armed forces of Honduras contracted to purchase weapons from Robco over a sixyear period. After the government was replaced and a democracy installed, the Honduran government sought to reduce the size of its military, and its relationship with Robco deteriorated. Honduras refused to honor the contract by purchasing the inventory of arms, which Robco could sell only at a much lower price. Robco filed a suit in a federal district court in the United States to recover damages for this breach of contract by the government of Honduras. Using the information provided in the chapter, answer the following questions. 1. Should the Foreign Sovereign Immunities Act preclude this lawsuit? Why or why not? 2. Does the act of state doctrine bar Robco from seeking to enforce the contract? Explain. 3. Suppose that prior to this lawsuit, the new government of Honduras had enacted a law making it illegal to purchase weapons from foreign arms dealers. What doctrine might lead a U.S. court to dismiss Robco's case in that situation? 4. Now suppose that the U.S. court hears the case and awards damages to Robco, but the government of Honduras has no assets in the United States that can be used to satisfy the judgment. Under which doctrine might Robco be able to collect the damages by asking another nation's court to enforce the U.S. judgment? DEBATE THIS The U.S. federal courts are accepting too many lawsuits initiated by foreigners that concern matters not relevant to this country.

ISSUE SPOTTERS Gems International, Ltd., is a foreign firm that has a 12 percent share of the U.S. market for diamonds. To capture a larger share, Gems offers its products at a below-cost discount to U.S. buyers (and inflates the prices in its own country to make up the difference). How can this attempt to undersell U.S. businesses be defeated? (See page 720.)

Answers to the even-numbered questions in this For Review section can be found in Appendix F at the end of this text. What is the act of state doctrine? In what circumstances is this doctrine applied?

The five Learning Objectives below are designed to help improve your understanding of the chapter. After reading this chapter, you should be able to answer the following questions: What is the act of state doctrine? In what circumstances is this doctrine applied?

Question with Sample Answer-Dumping. U.S. pineapple producers alleged that producers of canned pineapple from the Philippines were selling their canned pineapple in the United States for less than its fair market value (dumping). The Philippine producers also exported other products, such as pineapple juice and juice concentrate, which used separate parts of the same fresh pineapple, so they shared raw material costs, according to the producers' own financial records. To determine fair value and antidumping duties, the plaintiffs argued that a court should calculate the Philippine producers' cost of production and allocate a portion of the shared fruit costs to the canned fruit. The result of this allocation showed that more than 90 percent of the canned fruit sales were below the cost of production. Is this a reasonable approach to determining the production costs and fair market value of canned pineapple in the United States? Why or why not? (See page 720.)

Under the Foreign Sovereign Immunities Act of 1976, on what bases might a foreign state be considered subject to the jurisdiction of U.S. courts?

Under the Foreign Sovereign Immunities Act of 1976, on what bases might a foreign state be considered subject to the jurisdiction of U.S. courts?

Dumping. A newspaper printing press system is more than one hundred feet long, stands four or five stories tall, and weighs 2 million pounds. Only about ten of the systems are sold each year in the United States. Because of the size and cost, a newspaper may update its system, rather than replace it, by buying "additions." By the 1990s, Goss International Corp. was the only domestic maker of the equipment in the United States and represented the entire U.S. market. Tokyo Kikai Seisakusho (TKSC), a Japanese corporation, makes the systems in Japan. In the 1990s, TKSC began to compete in the U.S. market, forcing Goss to cut its prices below cost. TKSC's tactics included offering its customers "secret" rebates on prices that were ultimately substantially less than the products' actual market value in Japan. According to TKSC office memos, the goal was to "win completely this survival game" against Goss, the "enemy." Goss filed a suit in a federal district court against TKSC and others, alleging illegal dumping. At what point does a foreign firm's attempt to compete with a domestic manufacturer in the United States become illegal dumping? Was that point reached in this case? Discuss. [ Goss International Corp. v. Man Roland Druckmaschinen Aktiengesellschaft, 434 F.3d 1081 (8th Cir. 2006)

What types of provisions, or clauses, are often included in international sales contracts?

What types of provisions, or clauses, are often included in international sales contracts?

Case Problem with Sample Answer-Comity. Jan Voda, M.D., a resident of Oklahoma City, Oklahoma, owns three U.S. patents related to guiding catheters for use in interventional cardiology, as well as corresponding foreign patents issued by the European Patent Office, Canada, France, Germany, and Great Britain. Voda filed a suit in a federal district court against Cordis Corp., a U.S. firm, alleging infringement of the U.S. patents under U.S. patent law and of the corresponding foreign patents under the patent law of the various foreign countries. Cordis admitted, "[T]he XB catheters have been sold domestically and internationally since 1994. The XB catheters were manufactured in Miami Lakes, Florida, from 1993 to 2001 and have been manufactured in Juarez, Mexico, since 2001." Cordis argued, however, that Voda could not assert infringement claims under foreign patent law because the court did not have jurisdiction over such claims. Which of the important international legal principles discussed in this chapter would be most likely to apply in this case? How should the court apply it? Explain. [Voda v. Cordis Corp., 476 F.3d 887 (Fed.Cir. 2007)] (See pages 714-715.)

S. laws prohibiting employment discrimination apply in all circumstances to U.S. employees working for U.S. employers abroad?

S. laws prohibiting employment discrimination apply in all circumstances to U.S. employees working for U.S. employers abroad?

Sovereign Immunity. When Ferdinand Marcos was president of the Republic of the Philippines, he put assets into a company called Arelma. Its holdings are in New York. A group of plaintiffs, referred to as the Pimentel class, brought a class-action suit in a U.S. district court for human rights violations by Marcos. They won a judgment of $2 billion and sought to attach Arelma's assets to help pay the judgment. At the same time, the Republic of the Philippines established a commission to recover property wrongfully taken by Marcos. A court in the Philippines was determining whether Marcos's property, including Arelma, should be forfeited to the Republic or to other parties. The Philippine government, in opposition to the Pimentel judgment, moved to dismiss the U.S. court proceedings. The district court refused, and the U.S. Court of Appeals for the Ninth Circuit agreed that the Pimentel class should take the assets. The Republic of the Philippines appealed. What are the key international legal issues? [Republic of the Philippines v. Pimentel, 553 U.S. 851, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008)] (See pages 716-717.)

Dumping. The fuel for nuclear power plants is low enriched uranium (LEU). LEU consists of feed uranium enriched by energy to a certain assay-its percentage of the isotope necessary for a nuclear reaction. The amount of energy is described by an industry standard as a "separative work unit" (SWU). A nuclear utility may buy LEU from an enricher, or the utility may provide an enricher with feed uranium and pay for the SWUs necessary to produce LEU. Under an SWU contract, the LEU returned to the utility may not be exactly the uranium the utility provided. This is because feed uranium is fungible and trades like a commodity (such as wheat or corn), and profitable enrichment requires the constant processing of undifferentiated stock. LEU imported from foreign enrichers, including Eurodif, S.A., was purportedly being sold in the United States for "less than fair value." Does this constitute dumping? Explain. If so, what could be done to prevent it? [ United States v Eurodif , S. A., 555 U.S. 305, 129 S.Ct. 878, 172 LEd.2d 679 (2009)]

International Agreements and Jurisdiction. The plaintiffs in this ease were descendants of Holocaust victims who had lived in various countries in Europe. Before the Holocaust, the plaintiffs' ancestors had purchased insurance policies from Assicurazioni Generali, S.P.A., an Italian insurance company. When Generali refused to pay benefits under the policies, the plaintiffs, who were U.S. citizens and the beneficiaries of these policies, sued for breach of the insurance contracts. Due to certain agreements among nations after World War II, such lawsuits could not be filed for many years. In 2000, however, the United States agreed that Germany could establish a foundation-the International Commission on Holocaust-Era Insurance Claims, or ICHEIC-that would compensate victims who had suffered losses at the hands of the Germans during the war. Whenever a German company was sued in a U.S. court based on a Holocaust-era claim, the U.S. government would inform the court that the matter should be referred to the ICHEIC as the exclusive forum and remedy for the resolution. There was no such agreement with Italy, however. The plaintiffs sued the Italy-based Generali in a U.S. district court. The court dismissed the suit, and the plaintiffs appealed. Did the plaintiffs have to take their claim to the ICHEIC rather than sue in a U.S. court? Why or why not? ( In re Assicurazioni Generali, S. P. A., 592 E3d 113 (2d Cir. 2010)]

Sovereign Immunity. Bell Helicopter Textron, Inc., designs, makes, and sells helicopters with distinctive and famous trade dress that identifies them as Bell aircraft. Bell also owns the helicopters' design patents. Bell's Model 206 Series includes the Jet Ranger. Thirty-six years after Bell developed the Jet Ranger, the Islamic Republic of Iran began to make and sell counterfeit Model 206 Series helicopters and parts. Iran's counterfeit versions-the Shahed 278 and the Shahed 285-used Bell's trade dress. The Shahed aircraft was promoted at an international air show in Iran to aircraft customers. Bell filed a suit in a U.S. district court against Iran, alleging violations of trademark and patent laws. Is Iran-a foreign nation-exempt in these circumstances from the jurisdiction of U.S. courts? Explain. [ Bell Helicopter Textron, Inc. v. Islamic Republic of Iran, 892 F.Supp.2d 219 (D.D.C. 2012)] (See International Law.)

A Question of Ethics-Terrorism. On December 21, 1988, Pan Am Flight 103 exploded 31,000 feet in the air over Lockerbie, Scotland, killing all 259 passengers and crew on board and 11 people on the ground. Among those killed was Roger Hurst, a U.S. citizen. An investigation determined that a portable radio-cassette player packed in a brown Samsonite suitcase smuggled onto the plane was the source of the explosion. The explosive device was constructed with a digital timer specially made for, and bought by, Libya. Abdel Basset Ali Al-Megrahi, a Libyan government official and an employee of the Libyan Arab Airline (LAA), was convicted by the Scottish High Court of Justiciary on criminal charges that he planned and executed the bombing in association with members of the Jamahiriya Security Organization (JSO)-an agency of the former Libyan government that performed security and intelligence functions-or the Libyan military. Members of the victims' families filed a suit in a U.S. federal district court against the JSO, the LAA, Al-Megrahi, and others. The plaintiffs claimed violations of U.S. federal law, including the Anti-Terrorism Act, and state law, including the intentional infliction of emotional distress. [Hurst v. Socialist People's Libyan Arab Jamahiriya, 474 F.Supp.2d 19 (D.D.C. 2007)] (See pages 728-729.) 1. Under what doctrine, codified in which federal statute, might the defendants have claimed to be immune from the jurisdiction of a U.S. court? Should this law include an exception for "state-sponsored terrorism"? Why or why not? 2. The defendants agreed to pay $2.7 billion, or $10 million per victim, to settle all claims for "compensatory death damages." The families of eleven victims, including Hurst, were excluded from the settlement because they were "not wrongful death beneficiaries under applicable state law." These plaintiffs continued the suit. The defendants filed a motion to dismiss. Should the motion have been granted on the ground that the settlement barred the plaintiffs' claims? Explain.

Video Question To watch this chapter's video, International: Letter of Credit , go to www.cengagebrain.com. Register the access code that came with your new book or log in to your existing account. Select the link for the "Business Law Digital Video Library Online Access" or "Business Law CourseMate." Click on "Complete Video List," view Video 55, and then answer the following questions: 1 Do banks always require the same documents to be presented in letter-of-credit transactions? If not, who dictates what documents will be required in the letter of credit? 2 At what point does the seller receive payment in a letter-of-credit transaction? 3 What assurances does a letter of credit provide to the buyer and the seller involved in the transaction

Spectrum Stores, Inc.v. Citgo Petroleum Corp. United States Court of Appeals, Fifth District, 632 F.3d 938 (2011). www.ca5.uscourts.gov FACTS Spectrum Stores, Inc., and other U.S. gasoline retailers (the plain-tiffs) filed a suit against Citgo Petroleum Corporation and other oil production companies in a federal district court The plaintiffs alleged that the defendants had conspired to fix the prices of crude oil and refined petroleum products in the United States, primarily by limiting the production of crude oil. Citgo is owned by the national oil company of Venezuela, and most of the other defendants are owned entirely or in part by Venezuela or Saudi Arabia. Both nations are members of the Organization of Petroleum Exporting Countries (OPEC), which was formed by several oil-rich nations "to ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum." Spectrum sought damages, an injunction, and other relief. The court dismissed the suit and Spectrum appealed. ISSUE Does the act of state doctrine prevent a federal court from considering claims that companies owned by foreign governments had illegally conspired to fix oil prices in the United States? DECISION Yes. The U.S. Court of Appeals for the Fifth Circuit affirmed the lower court's dismissal. The act of state doctrine barred consideration of Spectrum's claims. REASON The court reasoned that under the act of state doctrine, a U.S. court will not rule on the validity of a foreign government's acts within its own territory. It is the sovereign right of each nation to decide how to exploit its own resources. Granting relief to Spectrum would effectively have ordered foreign governments to dismantle their chosen means of exploiting the resources within their own territories. Such a decision would also have had the effect of "embarrassing" the diplomacy carried out by the executive and legislative branches of the U.S. government. In other words, a ruling in this case would have interfered with the political branches' policy of affecting the global supply of oil by engaging with the OPEC nations in diplomacy rather than litigation. FOR CRITICAL ANALYSIS-Legal Consideration If the judicial branch does not have the authority to rule on matters of foreign policy, which branch of government does? Explain.

United States v. Inn Foods, Inc. United States Court of Appeals, Federal Circuit, 560 F.3d 1338 (2009). www.cafc.uscourts.gov FACTS Between 1987 and 1990, Inn Foods, Inc, imported frozen produce from six Mexican growers who agreed to issue invoices that understated the value of the produce. For each understated invoice, Inn Foods sent an order confirmation that estimated the produce's actual market value. Inn Foods later remitted the difference to the growers. Through this double invoicing system, Inn Foods undervalued its purchases by approximately $3.5 million and paid lower tariff taxes as a result. During an investigation by U.S. Customs and Border Protection, Inn Foods' accounting supervisor denied the existence of the double invoices. The federal government filed an action in the U.S. Court of International Trade against Inn Foods. The court held the defendant liable for fraud and assessed the amount of the unpaid taxes-$624,602.55-plus an additional penalty of $7.5 million. Inn Foods appealed, claiming that it had acted negligently, not fraudulently. ISSUE Does an importer's use of a double-invoicing system constitute proof of an intent to defraud the government of import duties? DECISION Yes. The U.S. Court of Appeals for the Federal Circuit affirmed the lower court's judgment. REASON The court reasoned that the evidence showed Inn Foods "knowingly entered goods by means of a material false statement" Each grower sent Inn Foods a copy of an undervalued invoice. The company knew that these invoices were "grossly undervalued and false"-the growers set out the details of the specific undervaluation in correspondence to Inn Foods. On receipt Inn Foods adjusted the prices to reflect their true estimated value. The company entered the higher amount into its accounting system, sent a confirmation to the grower with the higher price, and paid the grower based on the confirmed price. But Inn Foods knew the false invoices would be used to import goods into the United States. The company used the undervalued invoices to declare the value of the produce to U.S. Customs and Border Protection for import Moreover, Inn Foods concealed the existence of the double invoices during the government's investigation. FOR CRITICAL ANALYSIS-Ethical Consideration After Inn Foods learned of the investigation, the company included a disclaimer on some shipments stating that the declared value "is strictly for customs clearance" while the company determines the "true transaction value." Does this disclaimer legally or ethically absolve the importer of intent to defraud?

Khulumani v. Barclay National Bank, Ltd. United States Court of Appeals, Second Circuit, 504 F.3d 254 (2007). FACTS The Khulumani plaintiffs, along with other plaintiff groups, filed class-action claims on behalf of victims of apartheid-related atrocities, human rights violations, crimes against humanity, and unfair and discriminatory forced-labor practices. The plaintiffs brought this action in federal district court under the Alien Tort Claims Act (ATCA) against a number of corporations, including Bank of America, Barclay National Bank, Citigroup, Credit Suisse Croup, General Electric, and IBM. The district court dismissed the plaintiffs' complaints in their entirety. The court held that the plaintiffs had failed to establish subject-matter jurisdiction under the ATCA. The plaintiffs appealed to the U.S. Court of Appeals for the Second Circuit. ISSUE Can the plaintiffs bring a claim against U.S. and foreign companies under the ATCA for "aiding and abetting" human rights violations? DECISION Yes. The U.S. Court of Appeals for the Second Circuit vacated the district court's dismissal of the plaintiffs' claims and remanded the case for further proceedings. According to the reviewing court, a plaintiff may plead a theory of aiding and abetting liability under the ATCA. REASON The court stated that the district court "erred in holding that aiding and abetting violations of a customary international law cannot provide a basis for ATCA jurisdiction." The court reasoned that the United States Supreme Court has instructed courts in this nation to exercise caution and carefully evaluate international norms and potential adverse foreign policy consequences in deciding whether to hear ATCA claims. Thus, "the determination whether a norm is sufficiently definite to support a cause of action should (indeed, inevitably must) involve an element of judgment about the practical consequences of making that cause available to litigants in the federal courts." The court rejected the defendants' argument that an adjudication of the case by the U.S. court "would offend amicable working relationships with a foreign country." FOR CRITICAL ANALYSIS-Ethical Consideration Should the companies cited as defendants in this case have refused all business dealings with South Africa during the era of apartheid when the country's white government severely limited the rights of the majority black African population?