International Business Transactions
1. Transnational Lawyering and Litigation
A. The Rules of Transnational Practice
i. In re Roel (NY Court Appeals)
a. Mexican lawyer maintained office in NY and advised NY public on MX divorce law.
b. Held: Foreign lawyer cannot practice law in NY
1. NY Penal Law, Section 270 forbids anyone from “practicing law” without being licensed by the NY bar.
2. MX Lawyer gave “legal advice.” Even if the advice was about the law of MX. What matters is the nature of the activity performed, not the sources of the law that he practices. Violated NY law and enjoined to give any advice
3. Ct worried about protecting the public from unregulated legal advice. Even if lawyer is more competent of MX law, and has no impact in NY. Policy: If not a member of NY bar, cannot be disciplined for violating rules – being admitted to bar gives authority to regulate lawyer.
c. Dissent: Majority too broad and harmful to public.
1. Lawyer should practice if impact on NY. Foreign lawyers should give advice on foreign law bc they are good at it. Otherwise, we get sub-standard advice.
2. On majority reasoning, NY residents could seek advice from the following:
A. NY lawyer
B. Foreign lawyer admitted in NY, or
C. Foreign lawyer in foreign lawyer’s jx.
d. Tension bw giving clients access to those who know most of the law and regulating the availability of specialized advice.
ii. Modern NY Law
a. “Foreign Legal Consultants” can give advice on following
1. Own country’s law; and
2. NY and US law if based on the advice of a NY attorney.
b. FLC are subject to discipline in the same manner as NY lawyers.
c. ABA also recognizes FLC, but not all states do
iii. ABA Model Rule 5.5
a. Two questions to ask
1. Am I competent?
2. Will I be engaging in the unauthorized “practice of law” or “lower level activity”?
b. Competent Required
1. A lawyer must practice competent representation to client (legal knowledge, skill, thoroughness, and preparation)
A. Subject to malpractice and state bar discipline
c. Unauthorized Practice of Law
1. No lawyer shall “practice law” in jx that violates the regulation of that jx
A. Incorporates by reference rules from other jx
B. If American lawyer in France: be aware of both France and US rules
2. No unlicensed lawyer shall establish office or “systematic office or presence” for purpose of practicing law, unless otherwise authorized
A. “Lower level of activity” may be permitted, so long as does not “represent to public” that he is admitted to practice law.
B. Hypo
i. Can CA lawyer advise client on whether a K’s choice-of-law provision is enforceable in US?
a. Informal Advice
1. Yes. Choice-of-law is governed by state law. Even if this is a NY law issue, CA lawyer is competent to give advice of other states. If not, at least you know how to do the research.
b. Formal Advice
1. Cannot sign opinion letter (a formal legal opinion that client can hold against you) if not admitted in jx.
2. But, can draft the letter as long as you don’t sign it.
ii. Can CA lawyer advise client whether a distributorship agreement’s territorial restrictions violate Article 85 of Treaty of Rome?
a. Competent?
1. Depends on EU law
b. Authorized to practice?
1. Depends on EU law
2. You may also violate US rule 5.5
c. However, can suggest changes if competent to give it as long as informal advice.
iii. Can CA lawyer advise client whose investment in another country as been expropriated on the CIL rules concerning expropriation?
a. Yes, International law (treaties and customary international law) is everyone’s law and thus is American law.
1. The issue is whether competent, and authorized to practice law
iv. What concerns does the AM&S case raise about the confidentiality of such advice?
a. Rule 8.5 (p. 16)
1. Lawyer’s Ethical Duty when Rules of Different Jx Conflict
v. Hypo: In business transaction (not dispute) US requires disclosing client’s fraud; other party’s jx prohibits disclosure.
a. If MR 8.5(a) (own j has authority over you), (b) deals with choice of law – who’s rules do you follow?
1. Is this a dispute? If in arbitration, look at pace of arbitration. If preparing a witness for that arbitration in different jx, may be different.
2. If not, where is the predominate effect of conduct? Look to where the oher person is located. Here, disclosing or not disclosing fraudulent conduct. Of fraud of foreign party, most likely in other party’s jx (which ironically says don’t disclose).
3. Do not have to disclose bc law of predominate effect says not to disclose.
b. Conclusion: while the rules of your jx require disclosure, bc the jx of the predominant effect prohibits disclosure, you are allowed not to disclose.
C. AM&S (Court of Justice of EU)
i. EC investigates under own antitrust law (equivalent to Section 1, 2 of Sherman Act). EC responsible for enforcing anti-competitive rules. EC requests documents; party defends it is privileged.
ii. Appeals: Upheld privilege with limitations – if communication made for purpose of client’s defense and come from “independent lawyers” (top of 14)
a. Communications for Client’s Defense (Lowest common denominator approach)
1. Broad interpretation of client’s defense: applies to communications made before case if deal with same subject matter.
A. Here, communications occurred before enforcement, but dealt with same subject – whether AMS would violated EC competition law.
b. Advice must come from independent lawyer – not employed by client and licensed to practice in EU
1. AMS’s own General Counsel is not independent bc employed by AMS
2. Communications from outside counsel authorized only in US not protected
3. Only applies to lawyers admitted in EU state.
c. Conclusion: operation of privilege depends on the proceeding at issue
1. Privilege in enforcement proceeding is narrower than other proceedings
2. Thus, outside counsel licensed in EU jx is privileged.
d. Solution re structuring your legal representation if you are a multi-national corporation: use outside counsel licensed to practice in a EU jurisdiction.
1. Ethical Rules for Lawyers
A. Model Rules 1.1
i. US lawyers must have sufficient knowledge of law
ii. 5.5 prevents US lawyers to engage in authorized practice of law in foreign jx
2. In re Roel
i. Confidence and XX in tension
ii. NY Court of Appeals holds that Mexican lawyer cannot give advice about Mexican law, unless NY bar
iii. Denies NY Public was denied advice from foreign lawyers who were the most competent to give that advice
B. After that case, NY passed law to license foreign lawyers as FLC
i. Foreign Legal Consultants can give advice and subject to discipline by NY Bar
C. HYPO
i. A CA lawyer should be competent to advice on whether choice of law clause is enforceable in US Courts w/o engaging in unauthorized practice of law
a. Can CA lawyer give advice about whether territorial restrictions in distributor agreements violates EU antitrust law?
1. CA lawyer should be familiar with EU law generally and EU competition law specifically
b. If competent, probably would give informal advice but not formal advice (opinion letter) without being admitted to practice in a EU member state
c. A CA lawyer could be competent to give advice on the CIL about expropriation w/o unauthorized practice of law bc it is part of US law.
d. If two jurisdiction rules of professional conduct point in different directions, Model Rule 8.5 say US lawyer should follow rules where Tribunal located (if a Tribunal is involved) or place where the conduct would have a predominant effects
D. Attorney Client Privilege
i. AMS Case
a. The European Court of Justice allows privilege, but limited to advice from independent lawyers admitted in EU
b. This means most American lawyers cannot operate in the EU system.
c. The larger point of this case is that it comes as something of a surprise – that advice you might want to give might not be privileged. You should take nothing for granted in international transaction law.
3. International Litigation
A. Every international K should contain two provisions
i. Choice of law clause.
ii. Forum selection clause
a. Must consider three factors when deciding where to litigate
1. Will the enforcing court recognize the rendering court had Jx over defendant
2. Obtaining evidence
3. Whether resulting judgment is enforceable against assets of losing party
b. Possible fora for litigation
1. National courts (fallback if not specified K)
2. US Court
3. Foreign court of party to the transaction
4. Foreign court of a third jx
c. Plaintiffs like US Courts
1. Discovery more liberal (allows incriminating evidence after lawsuit filed)
2. Right to civil jury trial, usually resulting in higher damages
B. Jurisdiction
i. Each national system has own rules of jx
a. Almost all say the following
1. D may be sued where domiciled
2. D may be sued at place where COA arose (specific jx)
b. US has two additional basis for jx (not recognized by others)
1. Transient/Tag jx
2. Doing business jx when “consistent or systematic” contacts (general jx)
c. Additional JX in other countries
1. France: jx based on nationality of plaintiff
2. Germany/Austria: jx if D has any property in the jx even if unrelated to the COA
ii. Lesson: Uniform Foreign Money Act and German Act suggests, exorbitant Jx may make it hard to enforce judgment in non-exorbitant jx.
a. EX: A court will not enforce judgment if it thinks rendering court had no jx. So in the German Statute, if their citizen is sued in the US, a German court will not enforce it. So they had better have assets in the U.S. that you’ll be able to attach.
b. Most countries recognize jx based on party’s consent (choice of forum clause). This is most common basis for PJx for business transactions.
C. Zapata (US SC)
i. Facts
a. K to tow an oil rig from TX to Italy. Zapata ignored this clause and sued German company in Florida. Forum Selection Clause said resolution in London Court of Justice (Note: London Court of Justice does not exist; parties were probably referring to High Court of Justice)
ii. Questions
a. England has no connections to K. Why does London make sense?
1. Neutral forum (not US, not Germany)
2. Expertise of London Court of Justice in admiralty even if it is a court of general jx, not admiralty
b. If London makes sense, why did Zapata (US) sue in the US?
1. Zapata’s explanation: The damaged machine, witnesses, etc were located in US
2. Other explanations:
A. Damages favorable to US (note 5)
B. Exculpatory Clause may make German company not liable. US SC said such clauses are unenforceable Unclear if London court would.
c. Why doesn’t difference in outcome (exculpatory clause) justify US to have jx?
1. Sophisticated parties, arms-length transaction
2. Even if parties wouldn’t have been allowed to agree on exculpatory clause in the US, they can in international parties
iii. Rule
a. Forum selection generally okay
1. You can bring suit in England, but if you do you lose. A US Court would not enforce a clause.
2. Technically, decision only binding on federal courts sitting as admiralty court. Each state is allowed to select own rules. Choice of law is a matter of state law. But, almost all states follow.
b. Exceptions
1. Unequal bargaining power
2. Fraud, overreaching leading to an unfair clause.
3. K of adhesion (take-it-or-leave-it, without negotiations)
4. Would deny plaintiff of meaningful day in court (narrow exception)
A. Just because you are barred by exculpatory clause does not mean you are denied meaningful day in court.
B. Few cases have found P would not have meaningful day in court; exceptions were in context of Iran Hostage Crisis
c. Basic Point – Sophisticated parties have hard time not to abide by choice of forum clause
D. Purpose of Choice of Forum
i. Consent to Jx. Eliminates lack of consent or value defenses
a. However, if jx not connected to transaction, need to make sure the chosen jx will accept the case.
1. In Florida, those courts will not take jurisdictions simply on a FSC basis. There has to be some other connection to Florida. This is a point that’s worth rese
ships”
A. Bw US citizens, awards must come out of property abroad, performance abroad, or reasonably relates to foreign state
3. Federal courts have jx over NY Convention cases; federal courts can order parties to arbitrate, even if place is outside US
v. Take into account the attitude towards arbitration of local courts where the dispute is being arbitrated. Party A loses, and takes to court to set aside judgment
a. Egyptian awards against the Egyptian government were set aside
vi. NY Convention does not apply to all disputes
a. Agreements to arbitrate and enforcements do not need to be enforced if the subject matter is un-arbitrable
D. Mitsubishi Motors (p. 41)
i. Facts
a. Solar (manufacturer) entered into distributorship K with Chrysler International (CISA, Swiss sub of US Company) to sell cars in Puerto Rico. Chrysler can fill Solar’s order with any one of its affiliates. At the same time, Solar, CISA, and Mitsubishi (a joint venture bw Mitsubishi Heavy Industries and CISA) entered into Sales Agreement with arbitration clause.
b. Dispute bw Solar and Mitsubishi.
1. Mitsubishi filed to arbitrate in Japan, and filed in US federal court in Puerto Rico to compel arbitration. Solar denied all claims.
2. Solar filed action in US federal court under Sherman Act, and other state and federal law.
c. Issue is whether parties intended to arbitrate the Sherman Act claim.
ii. Required Arbitration Terms in the K?
a. Which disputes are going to be resolved through arbitration
1. The clause does satisfy what needs to be submitted to arbitration, but does not necessarily resolve all of the disputes that might possible arise (p. 41).
2. The clause only applied to two parties.
b. Place of arbitration
1. Yes, Japan
c. Method of appointing the arbitrators
1. Specified by referring to a set of rules – Japan Commercial Arbitration Association
iii. What Substantive law will be applied?
a. The Japan Commercial Arbitration Rules is not a choice of law clause. Substantive law to be applied is Swiss law. Even though Swiss K law governs, Mitsubishi concedes that US law will govern antitrust claims (p. 44 fn. 9).
iv. NY Convention requires enforcement of agreement to arbitration and awards
a. To enforce an award, two bases for the Convention to apply
1. The award is made in a foreign country; or
2. The award is NOT considered a domestic award, under the law of the country where it’s made.
A. The US would consider if the dispute has substantial foreign elements, then it’s still considered not to be a domestic award and within the NY Convention.
b. Must the enforcing country must be signatory?
1. Yes, they’ve got to be a stated party to the convention. It’s based on reciprocity. US by declaration enforces by reciprocity agreements – if other party enforces, US enforces.
c. Proper subject matter under arbitration?
1. Convention leaves it up to parties to decide which subjects are under arbitration
2. US, by declaration, limits applicability to commercial disputes
d. Any defenses to arbitration clause?
1. You need not refer to arbitration if clause is null & void (for reasons like fraud, mistake, duress).
A. It’s got to be arbitration clause specifically as void.
E. Article II – Enforcing Agreements to Arbitrate
i. Courts of signatory country will dismiss any lawsuit where parties agree to arbitrate
ii. 2 Exceptions
a. If the arbitration clause is null and void – fraud, mistake, duress
1. In US, must argue not that the entire agreement if void, but arbitration clause specifically is null and void for reasons of fraud, mistake, duress.
b. Subject matter not capable of enforcement.
2. Mitsubishi Motors (Blackmun)
A. Arbitration agreements for antitrust disputes not per se invalid. Blackmun says arbitrators can deal with this! In his view, the important thing is that you can bring a claim for damages, not necessarily where you can bring a claim.
B. Rejects core of American Safety Doctrine – antitrust claims too important to leave to arbitration.
i. Although treble damages encourages private enforcement of public antitrust violations, not required to bring the suit – and if not required, should be able to choose to vindicate claim through arbitration
ii. As long as can bring a claim for damages, does not matter where you bring the claim.
C. Blackmun said Congress has responsibility to decide which areas of law to arbitrate
i. Securities and antitrust are considered arbitrable
ii. Blackmun suggests will not arbitrate if Congress can specify what is not arbitrate (p 45 fn 10).
a. Incredibly pro-arbitration. Says the Congress could write a statute specifying what’s not arbitrable. But if Congress doesn’t court won’t. That’s an incredibly pro-arbitration stance. He is saying that court won’t independently make a determination that certain matters aren’t arbitrable.
D. What if arbitrator chooses not to apply US antitrust law, but Swiss law?
