International Business Transactions
Mooney
Spring 2011
I. Transnational Lawyering
a. The fact that one belongs to the bar of some other region doesn’t entitle one to the rights of the local bar
b. In re Roel (NY 1957)
Roel, a Mexican lawyer and citizen, is advising members of the public on Mexican law and preparing papers for Mexican divorces. He was not a member of the N.Y. bar.
Holding: Prohibition on unlicensed practice of law is not limited to New York law and includes giving advice on any law in New York.
Reasoning: Need to protect members of the lay public who seek legal advice.
Dissent: Injunction is too broad because it restrains Roel from holding himself out as a Mexican attorney or from giving any advice w/respect to foreign law and rendering legal services, which pertain exclusively to one jurisdiction.
c. Lawyers can represent a party in an international arbitration being held in a country to which they are foreign.
d. ABA Model Rule of Professional Conduct 5.5: Unauthorized Practice of Law; Multijurisdictional Practice of Law
(a) prohibits practice of law that violates the regulation of the legal profession in a jurisdiction
(b) lawyers not admitted to practice cannot establish an office or hold out to the public that he/she is admitted to practice law in a jurisdiction
(c) lists conditions under which a lawyer admitted in another U.S. jurisdiction can provide temporary legal services
(d) lists when a lawyer admitted in one U.S. jurisdiction can provide legal services in another jurisdiction
e. Foreign legal consultants (Some states allow, e.g., NY)
i. Can give advice about own country’s law and advise clients on U.S. law if based on advice of member of N.Y. bar
f. EU directive requires member states to adopt liberal treatment of lawyers from other EU states
g. ABA Model Rule 1.1: Competence governs when a lawyer undertakes to give advice or draft legal documents about a foreign system
h. Foreign Lawyers
i. It is important to understand the terms by which foreign legal professionals are designated (e.g., U.S. notary vs. German Notar)
ii. Other issues to consider:
1. Structures of the profession and of the groupings within that do the legal work
2. Rules and practices about entry to the legal profession
3. The number of lawyers (tends to increase as countries become more prosperous/industrialized)
iii. Confidentiality – all lawyers are expected to provide confidentiality to information given by clients. Privilege varies from country to country.
iv. AM & S Europe v. Commission of the European Communities Holding: Reg. No. 17 protects the confidentiality of written communications between lawyer and client so long as:
(1) Such communications are made for the purposes and in the interests of the client’s rights of defense
(2) Communications emanate from independent lawyers (i.e. those not bound to client by employment relationship)
This protection applies without distinction to any lawyer entitled to practice in one of the Member States
v. Council Regulation No. 1/2003: allows sharing of information between Commission and national competition authorities and among those authorities
i. Conflicts of the Law on Lawyers
i. ABA Model Rule 8.5: Disciplinary Authority; Choice of Law
(a) a lawyer admitted to practice in a jurisdiction will always be subject to discipline in that jurisdiction, an unadmitted lawyer is subject to disciplinary authority if he/she provides legal services in a jurisdiction
(b) for matters in connection with a tribunal, the disciplinary rules of the jurisdiction of the tribunal apply; other conduct is governed by rules of jurisdiction where conduct occurred *Applies to transnational practice unless international law provides otherwise*
II. International Dispute Resolution (Arbitration)
a. Arbitration
i. Advantages of Arbitration:
1. Awards enjoy the protection of the New York Convention, which requires each state party to enforce awards rendered in other state
2. Arbitration can be speedy, cheap, informal, and confidential
3. Neutral ground – neither party wants to litigate in other country
ii. UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)
1. Obligations of signatories:
(a) Enforce agreements to arbitrate (Article II p. 40)
(b) Recognize awards under such agreements & enforce them by proceedings not substantially more burdensome than those applicable to domestic awards (Article III)
2. Scope
(a) An arbitral award must be made outside the territory of the enforcing state or must not be considered as “domestic” by the law of that state
3. Permitted Signatory Limitations (U.S. does both)
(a) Can limit Convention’s application to awards rendered in other signatory countries
(b) Can limit awards to disputes that are considered “commercial”
4. Article II: obligation to enforce arbitration agreements
(a) “capable of settlement by arbitration” and “null and void, inoperative or incapable of being performed” left to determination of signatories’ courts
(b) Mitsubishi Motors Co. v. Soler Chrysler-Plymouth, Inc. (U.S. 1985)
Holding: Antitrust intended to be arbitrable
Reasoning:
§ Concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes requirement enforcement of the parties’ agreement
§ U.S. courts will have opportunity at enforcement stage to ensure that legitimate interest in the enforcement of antitrust laws has been addressed
Dissent: Articles II & V of NY Convention provide that agreements to arbitrate disputes which are nonarbitrable under domestic law need not be honored, nor awards rendered under them enforced.
5. Article III: requires signatories to recognize and enforce arbitral awards
6. Article V: exceptions to duty to recognize/enforce arbitral awards
(a) Upon request, and with proof that:
i. Incapacity of parties under applicable law
ii. Improper notice – unable to present case
iii. Award contains decisions on matters beyond the scope of the submission to arbitration
iv. Composition of arbitral authority or procedure contrary to agreement or applicable law
v. Award not yet binding, or set aside/suspended by competent authority where award was made
(b) If the recognition/enforcement court finds that:
i. Subject matter not capable of settlement by arbitration under law of that country
ii. Recognition/enforcement is contrary to public policy
(c) Yusuf Alghanim & Sons v. Toys “R” Us, Inc. (2nd Cir. 1997)
Holding: The FAA governs Toys “R” Us’s motion, and because there is no manifest disregard of the law or of the agreement, award is not vacated
Rule: Article V(1)(e) allows a court in the country under whose law the arbitration was conducted to apply domestic arbitral law to a motion to set aside/vacate that award.
Rule: A party may seek to vacate or set aside an award in the state in which, or under the law of which, the award is rendered. When an action for enforcement is brought in a foreign state, the state may refuse to enforce the award only on the grounds explicitly set forth in Article V.
Reasoning:
§ Convention applies here because dispute involved two nondomestic parties and one U.S. corp., and involved conduct and contract performance in the Middle East. It is therefore non-domestic.
§ In an action to confirm an award rendered in/under the law of a foreign jurisdiction, grounds for relief under Article V of the Convention are the only grounds available for setting aside an arbitral award
§ Arbitrator’s decisions are entitled to substantial deference, and awards may be vacated in the limited circumstances where the arbitrators award is in manifest disregard of the terms of the agreement or of the law.
o Definition of “manifest disregard” p. 58
7. “Federalism clause”
(a) Obligates signatory’s national government to put treaty into effect as far as within its own powers, and for the balance, to recommend action to its constituent states
(b) Chapter 2 of Federal Arbitration Act (FAA) (U.S.)
i. 201: provides for enforcement of the Convention
ii. 202: limits applicability to “commercial relationships” and in dealings involving U.S. citizens, to those arising out of a relationship that “involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states”
iii. 203: vests jurisdiction over Convention cases in federal courts
1. Can order arbitration even if the place agreed upon is outside the United States
8. Minimum Compliance of Arbitration Clauses (what to include in arbitration clause)
(a) Basic agreement to submit to arbitration some or all questions arising under the agreement
(b) Agreed-upon place for arbitration (must be state party to the Convention)
i. Likely an international arbitration institution – no need to lay out rules for conduct
(c) Method for appointing arbitrators
9. Other aspects to include in an arbitration clause: Single arbitrator vs. tripartite panel, choice of law, language in which arbitration is to take place
A Basic Introduction to Transnational Law
Transnational law includes all law that regulates actions or events that transcend national frontiers. Both public and private international law are included, as are other rules which do not wholly fit into such standard categories.
I. A Sketch of Transnational Law
a. Article 38 of International Court of Justice (ICJ) Statute
i. Court is directed to apply:
1. International conventions
2. International custom, as evidence of a general practice accepted as law
3. General principles of law recognized by civilized nations
4. Judicial decisions and teachings of distinguished publicists of various nations (subsidiary means)
b. Public International Law
i. International Conventions/Treaties
1. Agreements between two or more countries (treaties)
2. In the U.S. this means agreements made with 2/3 Senate vote or executive agreements
ii. Customary International Law
1. Results from a general and consistent practice of states followed by them from a sense of legal obligation
a. E.g., rules governing expropriation of foreign-owned property and rules limiting “prescriptive jurisdiction”
2. Best evidence is actual practice by states
3. International law has no system of precedent – but opinions of international tribunals can be persuasive evidence of customary int’l law
c. Private International Law
i. Two distinct uses:
1. Outside U.S., refers to rules for resolving private disputes having a significant relationship to more than one jurisdiction (U.S. – conflict of laws)
2. Refers to the substantive rules of domestic law that govern private transactions between borders
ii. Three parts of private international law:
1. When a court can take jurisdiction over a party or property identified as “foreign”
2. The extent to which the judgment of a court in Country A is entitled to rec
not a Japanese company and is not covered by Article VIII(1) of the Treaty
Takeaway: When interpreting a treaty, look to plain language first, then to intentions of signing parties.
f. Discrimination in FCN Treaties after Sumitomo
i. Tended to read “of their choice” provisions to allow only discrimination based on citizenship
ii. Title VII prohibits discrimination on the basis of “national origin” and would therefore cover citizenship discrimination whenever it has the purpose or effect of discriminating on the basis of national origin.
1. Courts of Appeals tend to disregard later-in-time rule and resolve this conflict in favor of treaties.
IV. The Extraterritorial Application of National Law
a. Restatement § 402: Bases of Jurisdiction to Prescribe
i. States have jurisdiction to prescribe law regarding:
1. Conduct, persons, or things present within its territory. Conduct outside its territory with a substantial effect within its territory
2. Activities, interests, status or relations of its nationals inside & outside its territory
3. Conduct outside its territory by non-nationals directed against state security
b. Restatement § 403 Limitations on Jurisdiction to Prescribe (p. 97)
i. Prohibition on exercise of jurisdiction when it is unreasonable
ii. List of factors in determining when an exercise of jurisdiction is unreasonable
iii. Requiring a state to defer to the state with a greater interest in cases where two states may exercise jurisdiction over a person/activity
c. Antidiscrimination Law
i. EEOC v. Arabian American Oil Co. (U.S. 1991)
P sues Aramco after it allegedly fired him on account of his race, religion, and national origin. Aramco argues Title VII does not apply to U.S. citizens employed abroad by American employers.
Holding: P fails to establish congressional intent for Title VII to apply extraterritorially
Rule: Legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States (presumption against extraterritoriality)
Reasoning:
§ Intent of Congress as to the extraterritorial application of this statute is deduced by inference from boilerplate language found in any number of Acts, none of which have ever been held to apply overseas
§ Congress is aware of the need to make a clear statement that a statute applies overseas. It should amend Title VII if need be.
Dissent: Court should exhaust all traditional tools of determining congressional intent before relying on assumption of no extraterritorial application
ii. Extraterritorial Application of Title VII After Aramco
1. 1991 Civil Rights Act
a. §2000e extends definition employee to U.S. citizens employed abroad
b. §2000e-1 Exemption
i. It is not unlawful to take action that would otherwise violate the Act if compliance would cause the employer/corporation to violate the law of the foreign country in which workplace is located.
ii. §§2002e-2-e-3 not applicable to foreign operations of an employer not controlled by an American employer
1. Factors in determining whether an employer controls a corporation (p. 107)
a. Tangood example (p.107–08)
2. EEOC: should look to a corporation’s place of incorporation to determine its nationality
a. Foreign-incorporated company’s may be considered an American employer if following factors suggest a significant connection the U.S.
i. Principal place of business
ii. Nationality of dominant shareholders
iii. Nationality/location of management
3. Mahoney v. RFE/RL, Inc. (D.C. Cir. 1995)
Holding: The “foreign laws” exception of the Age Discrimination in Employment Act applies when the overseas company, in complying with the Act, would be in breach of a collective bargaining agreement with foreign unions
Reasoning:
§ Under Norfolk, when a company fails to comply with a labor contract it violates “law”
§ Collective bargaining agreement here was valid and enforceable at the time of plaintiffs’ terminations, and RFE/FL had a legal duty to comply
Takeaway: Contracts made in good faith and along the lines of standard business practice in a foreign country that cause a U.S. company to violate the ADEA in that nation are exempt
