International Litigation and Arbitration
Spring 2010
I. Public Law and Conflict of Laws
a. Holman v. Johnson (King’s Bench, 1775)
i. Lord Mansfield’s Dictum:
ii. “No country ever takes notice of the revenue laws of another.”
iii. Why did they bring the action in England
1. Jurisdictional issue – they couldn’t get personal jx
2. The assets of the defendant are in England
b. India v. Taylor (House of Lords, 1955)
i. Facts: the Commissioner of Income Tax served a demand notice on the co “Delhi Electric Supply and Traction Co” , calling on the co to pay a retroactive capital gains tax due upon the liquidation of the company. Steps taken in India to dispute the amount of the assessment, and some of the amount owed was enforced on property still in India. D then took all the remaining assets of the co to England. India is trying to obtain the taxes due in an English court (no Indian court held that the tax was due).
ii. Issue: whether the appellant’s claim to prove in the liquidation of the co. in respect of an amt of income tax due from the co to the appellant under Indian income tax law is enforceable in English courts
iii. Procedure: Vaisey J made an order refusing appellant’s application. The Ct of Appeal then also dismissed the appeal.
iv. HELD: a foreign gov’t cannot come here and sue a person found in that jxn for taxes levied and which he is declared to be liable to in the country to which he belongs.
v. Reasoning:
1. assertion of sovereign authority by one State within the territory of another is contrary to all concepts of independent sovereignties
2. Learned Hand: a ct will not recognize those arising in a foreign State, if they run counter to the settled public policy of its own
3. the appellant is asking the ct to do what the cts of no other country have done
4. Can India enforce a tax judgment in English courts?
a. No.
b. Why?
i. The Revenue Rule
ii. Act of Parliament enshrining the revenue rule as an exception to the recognition of judgments
vi. Viscount Simonds
1. Reciprocity (tradition)
2. Common law rule (L. Mansfield)
3. reinforced by Act of Parliament on Enforcement of Judgments
4. Rejects argument that Lord Mansfield was wrong
5. Rejects argument that the rule should be abrogated in the Commonwealth
vii. Lord Keith
1. Collecting taxes is the exertion of sovereign authority in the territory of another sovereign
2. Enforcing the law would require public policy scrutiny of Indian tax law, which might violate principles of comity
viii. Lord Somervell
1. Distinguishes Lord Mansfield’s dictum in Holman v. Johnson
2. Comity might permit such an exercise, but no one has ever done it
3. Sovereignty/administration – English courts can’t be used as a tool for their tax administration
4. Too much effort/time for the courts
5. If plaintiff seeks to enforce a judgment as to tax due, this objection not valid, but “The principle remains.”
c. British Columbia v. Gilbertson (9th Cir. 1979)
i. Facts: BC sought recovery on a judgment for taxes in OR. D’s all citizens of OR, income from logging in BC. Subject to taxation under the BC Logging Tax Act
ii. Procedure: dist judge dismissed P’s case
iii. Issue: whether the cts of US would enforce a judgment rendered for taxes by the cts of a foreign gov
iv. HELD: The OR legislature continues to recognize the revenue rule. Dismissed.
v. Reasoning:
1. General Rule: judgments from a foreign country are recognized by the cts of this country when the general principles of comity are satisfied.
2. Exceptions to comity:
a. tax laws or
b. penal laws
3. Gen rule: before comity may be extended, generally thereis a req of reciprocity:
a. the cts of one jx will recognize a judgment from a second jx only if the cts of the second jx would recognize a judgment from the first jx’s cts
b. while reciprocity may no longer be a req, it remains a factor
c. even though the political branches of Canada and US could have abolished the revenue rule, they did not
d. If the reciprocity req is still valid to the recognition of another state’s tax laws, it should apply with at least equal effect when a foreign country seeks enforcement of its own ct’s tax judgment in the cts of this country
e. reciprocity would itself be a sufficient basis for denying BC’s claim: the cts of BC have refused to recognize the judgment of US ct for taxes
f. when and if the rule is changed, it is a more proper function of the legislature to make such a change
4. Can BC collect a tax levied on US citizens who were working in BC?
a. Possibly, under the doctrine of comity
b. But, limited by (1) the revenue rule and (2) the idea of reciprocity
II. The Revenue Rule and the Public Law Taboo
a. Regazzoni v. Sethia (1958)
i. Facts: breach of K case re jute bags, sold for the purpose of importing it into ZA in breach of Indian Act forbidding trade with ZA. Ultimate destination of sold goods was ZA. Both parties knew that the K could not be performed w/o the respondents procuring a breach of Indian law within Indian territory
ii. Issues:
1. whether respondents were justified in repudiating the K – if the K is prohibited by IN law it’s void as of the outset
2. whether in a suit between private persons the ct will enforce an illegal K?
3. whether this Indian law is a political (public) nature? If it’s a law that falls under the revenue rule, it should not be taken account.
iii. HELD: The law is not a revenue rule, but an exportation embargo and should be taken into account. Dismissed.
iv. Reasoning:
1. it is impossible for a ct in this country to set itself up as a judge of the rights and wrongs of a controversy between two friendly countries
2. the cts of this country should not enforce a K to smuggle goods into or out of a foreign and friendly state
3. Contract between private individuals
a. One Italian; other one Indian
b. Governing law of the contract is English law (by party choice)
c. Indian law forbids the contract because of Indian boycott of South Africa
d. Contract is at least partially to be performed in India
4. Should the English court enforce the contract?
a. Is India’s law prohibiting exports to South Africa a public (or political) law akin to the revenue rule?
v. Viscount Simonds
1. Differs from a revenue case in that no foreign sovereign is seeking to enforce its laws
2. Comity requires recognizing the laws of a friendly foreign country and giving effect to them
3. No other public policy concern requires deviating from that principle (implicit overruling of Boucher v. Lawson?)
vi. Lord Reid
1. Comity in background
2. Not a revenue or penal law
a. No exception applies to the recognition of this particular foreign law
b. Implicit judgment that India’s boycott is okay?
vii. Lord Cohen (concurs)
viii. Lord Keith
1. Comity requires giving effect to Indian law
ix. Lord Somervell
1. English courts should not enforce an illegal contract
2. Clear that conduct is prohibited by Indian law; there is no need to determine whether the conduct is wrong
3. Not a revenue rule issue, but even if it were not right to enforce a contract to smuggle
ght partially explain failure to apply law, but does not explain a failure to recognize a foreign judgment
2. Fear of embarrassing foreign nations (grounded in comity)
a. Selective enforcement is probably less offensive than a blanket refusal to enforce
b. In many instances the foreign government has requested enforcement, thus obviating this ground
c. One could respond to this argument with a rule requiring enforcement
3. Notion that courts of one state should not help to advance the interests of another (grounded in sovereignty)
a. This seems short sighted, as it precludes other states from helping that state’s nationals or government
b. Might be a basis for bargaining and encouraging abrogation of the revenue rule through treaties
d. Revenue Rule – the future?
i. Courts should not enforce foreign penal, tax, or regulatory law in a suit by a foreign government, either by applying that law to decide a case or by enforcing a foreign judgment (in the absence of a treaty)
ii. Courts should enforce foreign penal or regulatory law in a suit by a private party
iii. Governments should negotiate treaties for the reciprocal enforcement of such laws
III. The Revenue Rule Today
a. Banco do Brasil v. A.C. Israel Commodity Co. (N.Y. 1963)
i. Facts: Coffee export exchange rate was regulated by Brazil to be much lower than free market exchange rate (90 BCr = 1 USD v. 220 BCr = 1 USD)
1. Ks and exchange rate controlled by Banco do Brasil, give export permit after review of the K
ii. Procedure: BdB (P) brought suit in NY state court against importer, A.C. Israel (D) alleging conspiracy with non-party Exporter (E) to forge these export certifs. depriving BdB (& Country of Brazil) of proceeds
1. D moved to dismiss for failure to state a claim under U.S. laws and trying to enforce Brazilian exchange controls in the U.S.
2. Trial Ct. dismissed, CTA affirmed (4-3)
iii. HELD: Dismissal Affirmed – NY court will not enforce the BR exchange control laws and hold importer responsible for forging documents in contravention of such laws.
iv. Reasoning:
1. Bretton Woods Agreements (IMF) is a matter of public Int’l Law
2. Art. VIII (2)(b) prohibition of enforcing exchange contracts which are contrary to the exchange control of IMF members imposes no obligation on infividuals not to enter such Ks
3. P is agency of BR gov’t, trying to enforce what is CLEARLY a revenue law
4. Per Lord Mansfield, no country will enforce another’s revenue laws
5. The unenforceability provision evidences that suit by the aggrieved gov’t is unavailable.
v. Dissent:
1. Issue is matter of public policy
2. Bretton Woods overrides the Revenue Rule
3. Fraud was allegedly committed in NY
4. Not holding D responsible violates policy of Int’l cooperation.
b. Banco Frances de Brasileiro v. John Doe (N.Y. 1975)
i. Facts: Bank’s traveler’s checks were cashed to unauthorized persons in NY
1. BFB (P) was supposed to account to Gov’t of BR of the checks
2. P sought to recover the checks before they were cashed
