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International Business Transactions
Villanova University School of Law
Murphy, John F.

1/9

Introduction –
Transnational Lawyering
– focus on outward bound intl/transntl business

In re Roel (1957) – court requires Mexican lawyer to stop unauthorized practice of advice
about divorce in Mexico
NOW, NY rule – licensing of foreign attorneys to practice in NY as legal consultants w/o passing NY bar – cannot advise on NY/US federal law

1/10

Foreign Lawyers

Notary – highly regarded professionals in civil law countries
British system (barrister v. solicitor); educational system differences
Convergence to American system

EU – highest – Court of Justice
AM & S Europe v. Commission of the European Communities
– antitrust issue at EU level – attorney-client privilege – no EU level rule yet – so what rule to adopt à lawyer has to be independent lawyer, qualified to practice in one of EU states in order for written communication btwn client & lawyer to be privileged
Rule 8.5 Disciplinary Authority, Choice of Law –
Latest version – is where lawyer’s conduct occurs as opposed to location of lawyer’s main practice
Latest version – applies not only to court proceedings but international arbitration
Q20

1/12

International Litigation

JURISDICTION IN US COURTS

Differences in valid bases for personal jurisdiction
France – French citizenship
Germany – personal property in jurisdiction
US – domicile in forum, regular business in forum, cause of action arose in forum, served with process while in forum, consent
M/S Bremen v Zapata Off-Shore Company
– Upheld choice of forum clause (London Law)
– freely bargained for, unaffected by fraud, undue influence or overweening bargaining power
Carnival Cruise Lines, Inc. v. Shute
– upheld choice of forum clause (Florida) for 2 Seattle residents
Q (p29-31)

1/17

International Litigation

Enforcement of Judgments Internationally
– full faith and credit [US – Const, EEC – Brussels Convention
Procedural Problems in International Litigation
– US – liberal discovery ß court power to direct, sanction if noncompliance under FRCP Rule 37
Commission and Advisory Committee on International Rules of Judicial Procedure – Convention on the Service Abroad of Judicial or Extrajudicial Documents in Civil or Commercial Matters
Nondocumentary evidence –procuring oral testimony (depositions) and documentation abroad
Documentary evidence –
Q (P40-41)
Litigating Abroad
– civil cases – no juries – judge or panel of judges = civil servants à predictable outcomes, no hearsay rules, no discovery, judge develops facts
– appeals more de novo reviews
– costs “British rule” – prevailing party reimbursed [unlike American rule] – no contingency fees

1/19

International Arbitration

New York Convention – widely adopted multilateral treaty – requires state parties to enforce awards rendered in other states
2 types of arbitration
– ad hoc arbitration
– institutional (Int’l Chamber of Commerce, etc)
Advantages – award enforced where NY Convention ratified
Hope for speedy, cheap, informal and confidential – disappoint
Disadvantages
– no appeal, cost (can be very expensive), no discovery, only damages – no injunction
Art. V defenses (p 62) –
– subject matter not capable of settlement by arbitration
– contrary to the public policy of that country
Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc.
Upheld contract provision to arbitrate in Japan
– antitrust not nonarbitrable

Brandeis Intsel Limited v. Calabrian Chemicals Corp
Finds no basis to vacate award – “public policy” defense only available when violate forum state’s basic notions of morality and justice
Wilko v. Swan – “manifest disregard of the law” by arbitrators – judicially created ground for vacating arbitration award
Q (p 64)

1/23

Public International Law

CUSTOMARY INTERNATIONAL LAW

191 nations

Treaties are increasingly governing transactional issues
– but gaps exist, so customary international law used to fill in gaps
International Court of Justice (ICJ) – Art. 38
primary sources of international law
– International conventions
– International custom
o material element = general practice, state practice (subject to some dispute)
o psychological element = acceptance as law opinion juris sive necessitates
– General principles of law recognized by civilized nations
– Judicial decisions and the teachings of the most highly qualified publicists of the various nations
[Surprise – judicial resolution of disputes exception not the rule – but situation is changing]

Customary International Law
– “persistent objector” – if country persistently objects to creation of norm of customary int’l law, and continue with that object, not bound by it
o 1 exception to that rule = preemptory norms – no deviation permitted, state cannot opt out [jus cogens] – In US, int’l law binding in absence of controlling executive or legislative action – legislation not to be construed to violate int’l customary law unless clearly necessary
– Charming Betsy canon– statutes interpreted to be compatible with customary int’l law
– in case of conflict b/w a federal statute and treaty, “last in time rule” will apply
– In Germany, customary int’l law overrides legislative sattues [customary int’l law found to be violated in Nuremberg] EC protest against US for banning sales of equipment needed to develop natural gas pipeline from Russia to Western Europe when USSR imposed martial law in Poland
– extraterroriality – territoriality principle – restrict rule-making to persons/good within territory
– nationality – extending jurisdiction to co.s incorporated in EC on basis of corporate or personal link
Expropriation – most division issue in public int’l law – what compensation when country exploits the property of foreign co.
Q (p 83-84)

1/24

Public International Law: Treaties

US Restatement
Hull Rule – US position to which it adheres that
a) any expropriation by a foreign government of foreign nationals must be accompanies by prompt, adequate and effective compensation
– highly controversial area, not resolved as general matter but moot at present because of position supporting foreign investment (FI)
Q2: If representing case for developing country that expropriated – how would you argue? US Hull rule is not customary international law – most instances of expropriation, settlements where complaining state receives < 30 cents on $1 of value
– settlement are not evidence of customary law because they involve economic elements
– best evidence of customary law = what actually happens because it deals w. negotiation and agreement on terms
Q3: What is relevance of customary rule with proliferation of bilateral investment treaties (BITs)? – these are special deals [lex specialis] – not strong evidence, settlements are stronger evidence
Q4: If Hull Rule does represent customary law, how much comfort is that to an expropriated investor?
– Traditionally, investor would go to State Dept. international claims assistant legal advisor – bring claim against X country for – claimant = country – not individual investor
– Recently, opportunities for arbitration between foreign investor and expropriater country – NAFTA, World Bank BITs
Q5: What if expropriated property ends up in 3rd country?
– former owner brings suit to recover that property, asserting unlawfulness of seizure
– Mostly unsuccessful – 3rd party country does not want to get involved in disputes, not likely to help
– Variety of doctrines that make it difficult (foreign sovereign immunity)
In private practice – treaty law more likely to come up than customary int’l law
– US enters into other agreements other than treaties
US Constitutional law on treaties
– Art II – international treaties – require 2/3rds vote by Senate, ratification by states
– Overwhelming majority not entered into “treaty” form but in
Legislative agreement – majority of both Houses (easier than 2/3rds vote by Senate)
Executive or Presidential agreement – only authority of president
– Supreme Court has held that even a “presidential” agreement is Supreme Law of land under Supremacy Clause – over any state law or laws of the US
– Supreme Court distinguishes between
o Self-executing treaty is complete by its terms and requires no further action on the domestic level, es

– Curbs on trade
o Trading with the Enemy Act
o Quantitative restrictions – most harmful
o Voluntary Agreements –
§ Special multilateral agreement on textiles – extremely protectionist – has expired

1/30

GATT and WTO

WTO most extraordinary organization – long time coming and exceedingly controversial – very rule-oriented, legalistic institution – goal of claiming rule of law, successful in endeavors
Dispute Settlement area – US has lost many cases
– only States can bring suits against other States
2 GATTs – pre-1994 GATT, post 1994 GATT
Uruguay Round = most important of various rounds – brought revolutionary changes in area of international trade
Key Provisions
(1) Art. I — Most Favored Nation (MFN) principle – if you bilaterally agree on lowering tariffs with another contracting party, your agreement automatically extended to all other member states
Exceptions
a. Free trade areas – like NAFTA
b. Customs union – EU – common external tariff – in addition to free trade among members
(2) Art. II – WTO members cannot charge tariffs higher than those set forth in schedules
Exceptions (similar provisions in US law)
a. Anti-dumping
b. Countervailing duties
c. Escape clause
(3) Art. III – National Treatment principle – with respect to regulations – so less favorably than like products of national origin
(4) Art XI(1) – prohibits import restrictions other than tariffs – quantitiative provisions such as quotas
a. Dolphin Tuna case

Uruguay Round greatly expanded scope
Extended beyond trade in goods à services GATS
– extended into intellectual property à TRIPS
– extended into Trade-Related Investment Measures à TRIMS
[different from Tokyo round that came up w. a bunch of separate agreements that states could decide to agree to not] Tuna Dolphin case – pre-1994 decision,
US had legislation, Marine Mammal Protection Act (MMPA) that imposed restrictions on importation of tuna from countries that did not take sufficient measures to minimize killing of dolphins in Eastern Tropical Pacific (ETP) Ocean
– Mexico challenged these restrictions as import restrictions prohibited by Art XI(1) as a quantitative restriction (not tariff)
– US defended as internal regulation under Art. III
– Panel rejected as NOT an internal regulation affecting sale of product — affected process – fishing technique/ harvesting
– Art. XX argument by US that 2 provisions in Art. XX (b) & (g) – exceptions to measures that would otherwise violate GATT
o (b) allows measures both necessary to protect human, animal, plant life or health
o (g) allows measures related to conservation of exhaustible nature resources
o Panel rejected these arguments because animals not within US jurisdiction – extra jurisdictionally
o US actions not necessary because US hadn’t exhausted alternative methods
o Panel didn’t want unilateral action of US imposing standard on other countries
o No way that Mexico or other countries would know in advance of the standard that they had to adhere tobecause they would have to wait to see how many dolphins taken by US fisherman
Mexico also complained about US “dolphin safe” labeling provisions – not a restriction on tuna sales – marking of origin
– Panel rejected, no discrimination because applied to all countries fishing in ETP
Firestorm of objections – from environmentalists
Post 1994
Panel decision becomes binding unless consensus that it should not be adopted à eliminates GATT parties as check on panel decisions à Appellate Body to review issues