Deck 39: International Law in a Global Economy

Question 1

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?

Answer 1

The principle of comity states that the jurisdiction of one nation defers to and gives effect to the foreign nation's laws and judicial decrees.
Nations apply the principle of comity primarily to express courtesy and respect towards other nations' law and order. States honor each other's contracts, wills, deeds, and other legal obligations. Similarly, nations also attempt to honor the judicial decisions rendered in foreign nations when it is consistent with their national law and public policy.

Question 2

Letters of Credit. The Swiss Credit Bank issued a letter of credit in favor of Antes Industries to cover the sale of 92,000 electronic integrated circuits manufactured by Electronic Arrays. Die letter of credit specified that the chips would be transported to Tokyo by ship. Antes 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.

Answer 2

Letters of credit is a written instrument in which the issuing bank agrees to pay the beneficiary (seller), in return, the account party (buyer) assures to reimburse the issuer for the payment made to the beneficiary after the beneficiary has complied with the terms of the letter. Letters of credit facilitate international transactions.
No , the court should not compel the bank to pay the beneficiary.
The letter of credit required goods to be transported by ship. Since the seller shipped the goods by air, the shipment was nonconforming. Thus, the bank was justified in dishonoring the letter of credit because the seller failed to comply with the terms specified in the letter.

Question 3

Robco, Inc., was a Florida arms dealer. The armed forces of Honduras contracted to purchase weapons from Robco over a six-year 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?

Answer 3

(1) , the Foreign Sovereign Immunities Act (FSIA) will preclude this suit as the private party here cannot make claims against a foreign nation on a contract made by a previous government.
(2) , the act of state doctrine will bar Mr R from enforcing the contract on the Country H as it believes in national sovereignty and freedom of action in its own territory.
(3)The Act of State Doctrine will prevent Company R from seeking aid of the U.S. It makes clear that a country is free following its own rules in its own territory.
(4)The U.S antitrust trust law under Section 1 of the Sherman Act can be used by Company R for seeking damages from the foreign country. This law can however only be used only in case where the U.S. commerce has been substantially harmed due to non-compliance of the contract.

Question 4

The following multiple-choice question is representative of the types of questions available in one of the four sections of ThomsonNOW for Business Law Today. ThomsonNOW also provides feedback for each response option, whether correct or incorrect, and refers to the location within the chapter where the correct answer can be found. One of the major exceptions to the doctrine of sovereign immunity is made when a nation

A) engages in a military action.
B) engages in an action to protect the health of its citizens.
C) passes laws that prevent immigration from specific nations.
D) takes actions in connection with a commercial activity in the United States or that have a direct effect in the United States.

Question 5

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?

Question 6

Hypothetical Question with Sample Answer. As China and other formerly Communist nations move toward free enterprise, they must develop a new set of business laws. If you could start from scratch, what kind of business law system would you adopt, a civil law system or a common law system? What kind of business regulations would you impose?

Question 7

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?

Question 8

Dumping. In response to a petition filed on behalf of the U.S. pineapple industry, the U.S. Commerce Department initiated an investigation of canned pineapple imported from Thailand. 'Ile investigation concerned Thai producers of the canned fruit, including the Thai Pineapple Public Co. 'Die Thai producers also turned out products, such as pineapple juice and juice concentrate, outside the scope of the investigation. These products use separate parts of the same fresh pineapple, so they share raw material costs. To determine fair value and antidumping duties, the Commerce Department had to calculate the Thai producers' cost of production and, in so doing, had to allocate a portion of the shared fruit costs to the canned fruit. These allocations were based on the producers' own financial records, which were consistent with Thai generally accepted accounting principles. The result was a determination that more than 90 percent of the canned fruit sales were below the cost of production. The producers filed a suit in the U.S. Court of International Trade against the federal government, challenging this allocation. The producers argued that their records did not reflect actual production costs, which instead should be based on the weight of fresh fruit used to make the products. Did the Commerce Department act reasonably in determining the cost of production? Why or why not? [Thai Pineapple Public Co. v. United States, 187 111.3d 1362 (Fed.Cir. 1999)]

Question 9

In what circumstances will U.S. antitrust laws be applied extraterritorially?

Question 10

Sovereign Immunity. Tonoga, Ltd., doing business as Taconic Plastics, Ltd., is a manufacturer incorporated in Ireland with its principal place of business in New York. In 1997, Taconic entered into a contract with a German construction company to supply special material for a tent project designed to shelter religious pilgrims visiting holy sites in Saudi Arabia. Most of the material was made in-, and shipped from, New York. The company did not pay Taconic and eventually filed for bankruptcy. Another German firm, Werner Voss Architects and Engineers, acting as an agent for the govern-molt of Saudi Arabia, guaranteed the payments due Taconic to induce it to complete the project. When it did not receive the final payment, Taconic filed a suit in a U.S. district court against the government of Saudi Arabia, claiming a breach of the guaranty and seeking to collect, in part, about S3 million. The defendant filed a motion to dismiss based, among other things, on the doctrine of sovereign immunity. Under what circumstances does this doctrine apply? What are its exceptions? Should this suit be dismissed under the 'commercial activity" exception? Explain. [Tonoga, Ltd. v. Ministry of Public Works and Housing of Kingdom of Saudi Arabia, 135 F.Supp.2d 350 (N.D.N.Y. 2001)]

Question 11

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

Question 12

Case Problem with Sample Answer. DaimlerChrysler Corp. makes and markets motor vehicles. DaimlerChrysler assembled the 1993 and 1994 model years of its trucks at plants in Mexico. Assembly involved sheet metal components sent from the United States. DaimlerChrysler subjected some of the parts to a complicated treatment process, which included applying coats of paint to prevent corrosion, impart color, and protect the finish. Under U.S. law, goods that are assembled abroad using US made parts can be imported tariff free. A U.S. statute provides that painting is "incidental" to assembly and does not affect the status of the goods. A. U.S. regulation, however, states that "painting primarily intended to enhance the appearance of an article or to impart distinctive features or characteristics" is not incidental. The U.S. Customs Service levied a tariff on the trucks. DaimlerChrysler filed a suit in the U.S. Court of International Trade, challenging the levy. Should the court rule in DaimlerChrysler's favor? Why or why not? [DaimlerChrysler Corp. v. United States, 361 F.3d 1378 (Fed.Cir. 2004)]

Question 13

Comity. E L Consulting, Ltd., is a U.S. corporation that sells lumber products in New Jersey, New York, and Pennsylvania. Doman Industries,. Ltd., is a Canadian corporation that also sells lumber products, including green hem-fir, a durable product used for homebuilding. Doman supplies more than 95 percent of the green hem-fir for sale in the northeastern United States. In 1990, Doman contracted to sell green hem-fir through E L, which received monthly payments plus commissions. In 1998, Sherwood Lumber Corp., a New York firm and an E L competitor, approached E L about a merger. The negotiations were unsuccessful. According to E L, Sherwood and Doman then conspired to monopolize the green hem-fir market in the United States. When Doman terminated its contract with E L, the latter filed a suit in a federal district court against Doman, alleging violations of U.S. antitrust law. Doman filed for bankruptcy in a Canadian court and asked the U.S. court to dismiss E L's suit under the principle of comity, among other things. What is the "principle of comity"? On what basis would it apply in this case? What would be the likely result? Discuss. [H L Consulting, Ltd. v. Doman Industries, Ltd., 360 F.Supp.2d 465 (E.D.N.Y. 2005)]

Question 14

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)]

Question 15

International Principles. Jan Voda, MD., 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 he most likely to apply in this case? Mow should the court apply it? Explain. [Voda v. Cordis Corp., 476 F.3d 887 (Fed.Cir. 2007)]

Question 16

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 Libyan government that performed security and intelligence functions) or the Libyan military. Members of the victims' families filed a suit in a U.S. 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 page 458.)
(a) Under what doctrine, codified in which federal statute, might the defendants claim 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?
(b) 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 be granted on the ground that the settlement bars the plaintiffs' claims? Explain.

Question 17

Critical Legal Thinking. Business cartels and monopolies that are legal in some countries may engage in practices that violate U.S. antitrust laws. In view of this fact, what are some of the implications of applying U.S. antitrust laws extraterritorially?

Question 18

Case Analysis Question. Co to Appendix G at the end of this text and examine Case No. 10 [JP Morgan Chase Bank v. Altos Homes de Mexico, S.A. de C.V., ____ F.Supp.2d____ (S.D.N.Y. 2004, affirmed on appeal, 412 F.3d 418 (2d Cir. 2005)]. This case has been excerpted there in great detail. Review and then brief the case, making sure that your brief answers the following questions.
1. What was the primary issue to be decided by the court in this ease?
2. Why might a Mexican court be better able to determine the ownership of the funds in the collection account in this case?
3. Would it change the result in this case if the parties had provided in the loan documents that the borrower waived "to the fullest extent permitted by law" any objection to venue? Why or why not?

Question 19

Video Question. Go to this text's Web site at www.thomsonedu.com/westbuslaw/blt and select "Chapter 39." Click on "Video Questions" and view the video titled International: Letter of Credit. 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 he 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?