International Law In Brief
Developments in international law, prepared by the
Editorial Staff of International Legal Materials
The American Society of International Law
October30, 2004
©2004 American Society of International Law
(Educational copying is permitted with due acknowledgment)
JUDICIAL AND SIMILAR PROCEEDINGS
DECLARATIONS, RESOLUTIONS AND OTHER DOCUMENTS
JUDICIAL AND RELATED DOCUMENTS
World Trade Organization (WTO) Panel: European Communities-Export Subsidies on Sugar (October 15, 2004)
The WTO issued a panel decision finding that the European Communities provided export subsidies for its sugar producers in excess of those limits prescribed by the WTO. The Panel’s ruling upheld the complaints filed by Australia, Brazil and Thailand alleging that the European Communities violated cross-subsidized sugar exports by setting high prices for sugar under domestic quotas in violation of WTO rules. They alleged that the high prices under the domestic quotas allowed European Communities producers to sell their sugar abroad at artificially low prices.
The panel found that sugar producers in the European Communities receive payment on export by means of governmental action through sales of sugar below the total costs of production to sugar producers. It found that pursuant to Article 10.3 of the Agreement on Agriculture, the European Communities failed to demonstrate that exports of sugar that exceed the European Communities' commitment levels since 1995 and in particular since the marketing year 2000/2001, have not been subsidized. Consequently, it found that the European Communities acted inconsistently with Articles 3 and 8 of the Agreement on Agriculture.
In this regard the panel relied on a previous WTO Appellate Body ruling in a case brought by the United States and New Zealand concerning Canada’s subsidization of dairy products.
Click here for a link to recent WTO panel reports.
Click here for further EISIL resources on international trade dispute settlement.
United States (U.S.) Court of Appeals for the Second Circuit: Tachiona et al. v. United States of America (October 6, 2004)
The U.S. Court of Appeals for the Second Circuit (“the Second Circuit”) held that Robert Mugabe and Stan Mudenge were entitled to diplomatic immunity and head of state immunity. It also dismissed the plaintiffs’ claims against Mugabe and Mudenge in their capacity as agents of the Zimbabwe African National Union-Patriotic Front (“ZANU-PF”), reversing in part a lower court decision. The Second Circuit found that Article 29 of the Vienna Convention on Diplomatic Relations, as applied to Mugabe and Mudenge through Article IV, section 11(g) of the United Nations Convention on Privileges and Immunities, protected Mugabe and Mudenge from service of process as agents for ZANU-PF.
The United States, as intervenor-appellant-cross appellee, appealed from a default judgment entered by the U.S. District Court for the Southern District of New York (“the District Court”) against defendant ZANU-PF for violations of the Alien Tort Claims Act, Act 28 U.S.C. §1350. The District Court held that while Mugabe and Mudenge were entitled to diplomatic and head-of-state immunity, their immunity did not protect them from service of process as agents for ZANU-PF, a private entity not entitled to the benefit of diplomatic immunity. Accordingly, the District Court found that ZANU-PF was properly served with process and thus subject to a default judgment upon failure to appear in this litigation.
ZANU-PF is a private political party whose members have ruled Zimbabwe since 1980. At all relevant times concerning this litigation, Mugabe was the President of Zimbabwe and the President and First Secretary of ZANU-PF, and Mudenge was the Zimbabwean Foreign Minister and a ZANU-PF official. In September 2000, Mugabe and Mudenge visited New York City as delegates to the United Nations Millennium Summit. During their visit to New York, they attended a private political rally and fund-raiser in Harlem sponsored by non-governmental organization called “Friends of ZANU-PF,” where Mugabe was scheduled to speak. Just before he entered the church, Mugabe was served with two copies of the complaint in this action, one in his personal capacity and the other on behalf of ZANU-PF. The next day, Mudenge was served with a copy of the same complaint on the street outside the Zimbabwe Mission building. The complaint alleged that Mugabe, Mudenge and ZANU-PF were responsible for violations of the Alien Tort Claims, the Torture Victim Protection Act of 1991. The complaint sought redress against Mugabe, Mudenge and ZANU-PF for subjecting them and/or members of their family to torture, assault, execution and other acts of violence. The complaint purported to sue Mugabe and Mudenge in their individual, not official, capacities. None of the defendants appeared before the District Court at any stage of the litigation. Several months after Mugabe and Mudenge were served with process, the United States filed a “suggestion of immunity” pursuant to 28 U.S.C. §517, in which it maintained that the claims against Mugabe and Mudenge should be dismissed on grounds of diplomatic and head-of-state immunity.
The Second Circuit noted that the text of section 11 of the U.N. Convention on Privileges and Immunities “is ambiguous,” observing that “[i]t is not clear what would make a particular immunity or privilege ‘inconsistent with’ any of the privileges and immunities specifically enumerated in section 11.” The Second Circuit found that since the answer was not evident from the face of the treaty, it had to resort to interpretive tools.
It noted that the U.S. government officials who ratified the U.N. Convention on Privileges and Immunities clearly believed that it would afford full diplomatic immunity to temporary U.N. representatives, noting two excerpts from a report of the Senate Committee on Foreign Relations that was charged with considering whether the United States should ratify the U.N. Convention on Privileges and Immunities. It found that the Senate Foreign Relations Committee and the U.S. State Department “both believed that the U.N. Convention on Privileges and Immunities would confer more than just “functional” immunity, i.e. the type of immunity described in section 11(a), on temporary U.N. representatives; they understood that such representatives would be afforded “full diplomatic immunities.” The Second Circuit noted that the interpretation of section 11(g) of the U.N. Convention on Privileges and Immunities advanced by the U.S. Government in this litigation would be accorded great weight, and that from this it was persuaded that section 11(g) extended to temporary U.N. representatives like Mugabe and Mudenge the full range of immunity from legal process afforded by Article 31 of the Vienna Convention on Diplomatic Relations.
The Second Circuit noted, however, that section 11 of the U.N. Convention on Privileges and Immunities stipulated that the immunities described apply only while the U.N. representative is “exercising [his] functions and during [his] journey to and from the place of meeting.” The Second Circuit observed that whereas Mudenge was served with process outside of the Zimbabwe U.N. Mission building, and therefore clearly was protected by the parameters set forth in section 11 of the Convention, Mugabe was served process while attending a ZANU-PF fund-raising rally, a private activity unrelated to his duties as U.N. representative. Nonetheless, the Second Circuit declined to give section 11 such a narrow reading as to consider that during this activity Mugabe was not entitled to the protection of diplomatic immunity as a U.N. representative. Quoting former U.N. Secretary-General Kurt Waldheim, the Second Circuit recognized that U.N. representatives traveling to U.N. conferences typically engage in activities “ancillary to their actual representative functions.” Therefore it interpreted the words “while exercising their functions” to mean “during the entire period of presence in the State... for reasons of the conference in question. The Second Circuit further found that no exceptions under Article 31 of the Vienna Convention on Diplomatic Relations applied.
In regard to the District Court’s decision finding that Mugabe and Mudenge were not entitled to diplomatic immunity as agents of ZANU-PF, the Second Circuit disagreed, finding that “the legislative history of the [Foreign Sovereign Immunities Act] demonstrates unequivocally that the Act was not intended to affect the immunity of ‘diplomatic or consular representatives.’” The Second Circuit found that the District Court mistakenly reasoned that since Article 31 of the Vienna Convention on Diplomatic Relations permitted suits against diplomats in certain limited circumstances, service of process does not violate the inviolability principle. Rather, the Second Circuit found the inviolability principle must be construed broadly. It also found that ZANU-PF was not properly served, and dismissed all claims against it.
Click here for the decision.
Click here for EISIL resources on the United Nations.
United States (U.S.) Court of Appeals for the Fifth Circuit: Plata v. Dretke and the Texas Department of Criminal Justice, Institutional Division (August 16, 2004)
The petitioner’s request for habeas relief and related claims concerning his rights under the Vienna Convention on Consular Relations (“the Vienna Convention”) were denied.
The petitioner, Daniel Angel Plata, is a Mexican national and Texas state prisoner who pleaded guilty to murder and was sentenced to death. After exhausting his state remedies, he applied for a writ of habeas corpus in federal district court raising several grounds for relief. Before the Fifth Circuit, Plata contended, inter alia, that he is entitled to habeas relief based on Texas’s failure to advise him of his right to consular assistance under the Vienna Convention. The United States District Court for the Southern District of Texas denied his application for a writ of habeas corpus and refused to grant a certificate of appealability (“COA”). The District Court concluded that the petitioner’s claim concerning the Vienna Convention was barred by the procedural default rule. It further found that even if his Vienna Convention claim had been properly raised, (1) the Vienna Convention did not create personally-enforceable rights and (2) in any event the petitioner failed to show prejudice from the failure to afford him consular assistance under the Vienna Convention.
The Fifth Circuit cited the International Court of Justice’s decision in Avena and Other Mexican Nationals (Mexico v. United States), noting that even if Plata’s Vienna Convention claims were not barred by the procedural default rule, he would still have to show that the alleged violation of the Vienna Convention had some effect on his trial. Plata asserted that he was prejudiced by the lack of consular assistance owed to him under the Vienna Convention because he did not understand why, under the Texas legal system, it would have benefited him to plead guilty, and because the consul would have litigated the inequality of the prosecutor’s grant of favorable plea deals to his co-conspirators. He further contended that consular assistance would have helped him to find medical documents in Mexico to demonstrate that he was injured at birth and physically abused by his father, documents that would have confirmed that he suffered from schizophrenia.
The Fifth Circuit found that Plata’s arguments concerning prejudice suffered at trial were without grounds. It noted that the trial counsel’s affidavit in the state habeas proceedings stated that he explained to Plata the consequences of pleading guilty. The Fifth Circuit further found that as Plata had not produced the records to support his claims of oxygen deprivation at birth and physical abuse by his father, he could not show that the Vienna Convention violation resulted in prejudice to him. It found that Plata’s claim that the Mexican consul would have traveled to Mexico to obtain records and interview his relatives was purely speculative.
Decision available on Lexis.
United States (U.S.) Court of Appeals for the Fifth Circuit: Af-Cap Inc. v. Republic of Congo, et al. (September 17, 2004)
The U.S. Court of Appeals for the Fifth Circuit (“the Fifth Circuit”) held that the Republic of Congo could not claim sovereign immunity for certain assets under the Foreign Sovereign Immunities Act (FSIA) in order to avoid an undisputed debt.
On December 18, 1984, the Republic of Congo entered into a Lending Contract with Equator Bank Limited to provide funds necessary for the construction of a highway. To obtain the loan, the Republic of Congo pledged as collateral “all of its assets and properties, wherever located.” In the Lending Contract, the Republic of Congo expressly waived any right to claim foreign sovereign immunity either from suit or from attachment or execution on its property.
The Republic of Congo defaulted in 1985. Connecticut Bank of Commerce (“the Bank”), an assignee of the Lending Contract, obtained a default judgment against the Republic of Congo in a London, England court. The Bank filed suit in a New York state court in order to enforce this foreign judgment in the United States. The Republic of Congo did not appear and the court entered a default judgment in the amount of $13,628,340.11 in favor of the Bank. The New York court also entered an order of attachment, authorizing the Bank to execute against “any assets or other property of the Congo of any nature, irrespective of the use or intended use of such property . . . including any . . . payments or obligations due to the Congo from any oil and gas exploration and development companies . . . .” On January 11, 2001, the Bank registered the New York judgment in a Texas state court. It then filed garnishment actions there against, inter alia, CMS Nomeco Congo, Inc. (“CMS”), Nuevo Congo Company (“Nuevo”), and Nuevo Congo Ltd. (collectively “the Garnishees”) in order to garnish intangible property purportedly belonging to the Republic of the Congo, namely, the Garnishees’ obligations to pay the Republic of Congo taxes and royalties. The Garnishees are successors in-interest to a 1979 joint venture (the “Convention”) between a state-owned Congolese company, now known as the Societe Nationale des Petroles du Congo (“SNPC”), and several oil companies for oil production in the Republic of Congo. Under the terms of the Convention, the Republic of Congo permitted the joint venture to extract oil in exchange for the payment of royalties and a variety of taxes related to the Garnishees’ activities.
Following the Bank’s filing of its garnishment action in Texas state court, the Republic of Congo and the Garnishees removed the case to federal court. They argued that the Republic of Congo was entitled to sovereign immunity from the garnishment action under the Foreign Sovereign Immunities Act (“FSIA”), 28 U.S.C. §§ 1602-1611. In response, the Bank contended that the Republic of Congo had expressly waived sovereign immunity in the Lending Contract. The Bank also argued that the Texas court was bound by the earlier attachment order issued by the New York court. The district court dismissed the action, rejecting both arguments of the Bank. First, the court rejected the claim that the New York judgment had any preclusive effect on the present case. The court also rejected the Bank’s claim that in the Lending Contract, the Republic of Congo had waived sovereign immunity even though it was express and in writing; the court held that such a total waiver was ineffective under § 1610(a) of the FSIA, which recognizes only conditional waivers. Specifically, the court found that even when a foreign state purports to waive completely its immunity, the FSIA only permits execution on property that is “commercial.” The district court concluded that the royalty and tax payments to the Republic of Congo were noncommercial in nature, and thus the property was immune from attachment under § 1610(a). The Bank then appealed to the Fifth Circuit. The Fifth Circuit affirmed the district court’s holding that the New York attachment order had no preclusive effect. (Connecticut Bank of Commerce v. Republic of Congo, 309 F.3d 240, 248-51 (5th Cir. 2002)). It also agreed that, under the FSIA, a waiver of immunity only applies “against property that meets . . . two statutory criteria,” namely, that the property in question be “in the United States” and “used for commercial activity in the United States.” It concluded, however, that the district court had erred in applying the statute by incorrectly focusing on how the property was generated instead of fully considering what it is “used for.” The Fifth Circuit remanded the case to the district court with the narrow and specific instructions that it resolve the factual question of what the royalty and tax obligations are “used for.” The Fifth Circuit ruled that if it turns out that the royalties and tax obligations are not used for any commercial activity in the United States, the district court should dissolve the writs of garnishment and dismiss the action. On remand, the district court ordered discovery to determine whether the tax and royalty obligations were property “used for” commercial activity in the United States.
After hearing arguments, the district court held that the Republic of Congo did not use its tax and royalty obligations for commercial activities. Therefore, it held that this property did not come under an exception to immunity and dismissed the garnishment action. In this appeal, Af-Cap claims that (1) the district court erred in disregarding the Republic of Congo’s express waiver of immunity contained in the Lending Contract and (2) asserts that the district court erroneously concluded that the royalty and tax payments were not used for commercial activity.
Because the Fifth Circuit found no clear error in the district court’s material factual findings, the question it examined was strictly a legal one: whether such past commercial use is sufficient to render these obligations “property used for commercial purposes” for purposes of the FSIA. The Fifth Circuit observed that an analysis of the commercial use of property should examine the totality of the circumstances surrounding the property, and include an examination of the uses of the property in the past as well as all facts related to its present use. The Fifth Circuit noted that for nearly half of the twenty-four years that these obligations existed, the Republic of Congo has used at least fifty percent of them to repay a commercial debt. It concluded that “[t]he amount of the debt repaid was not insignificant; during the course of this extended period of time, over $26,000,000 was diverted from these obligations to the Congo’s commercial creditor. Such a continuing, extended and monetarily significant use is neither exceptional nor de minimis. Moreover, it is difficult to say that execution on this obligation would be so unusual that it would shock and disrupt the public affairs of the Congo.[...]it is strongly suggestive that the proceeds of these tax and royalty obligations were not cordoned off for use of the Congo in its sovereign capacity. Instead, it indicates the availability of this property for whatever purpose -- commercial or otherwise -- the Congo deems appropriate. Such property seems hardly the type of foreign property the FSIA was designed as a shield to protect, i.e., funds so central to a nation’s operations as a sovereign that uses thereof would “interrupt[] the public acts of [this] foreign state.” Accordingly, it concluded that these tax and royalty obligations are used for commercial purposes for purposes of § 1610(a) of the FSIA.
Click here for the decision.
DECLARATIONS, RESOLUTIONS AND OTHER DOCUMENTS
International Centre for the Settlement of Investment Disputes (ICSID) Secretariat: Discussion Paper on Possible Improvements of the Framework for ICSID Arbitration (October 22, 2004)
The ICSID Secretariat has made available a discussion paper concerning possible improvements of the framework for ICSID arbitration. The introduction to the discussion paper notes that since the late 1990s, almost all of the new ICSID arbitration cases have been initiated by virtue of the investor-State dispute settlement provisions of investment treaties. It observes that there are presently over 1,500 bilateral investment treaties (“BITs”) containing these provisions in addition to several multilateral treaties including NAFTA and the Energy Charter Treaty. It further notes that “[i]n many respects, parties to proceedings seem to have continued to regard the ICSID and Additional Facility Rules as adequately meeting their needs. However, in a number of areas, concerns have been raised and there have been proposals for change.”
Preliminary procedures, in particular, interim measures for protection or relief, are featured among the areas for which proposals for change have been made. One suggestion presented in the discussion paper provides for introducing an expedited procedure for submissions by the parties so that requests for interim relief may be considered by the arbitral tribunal immediately after its constitution. Other suggestions noted in the discussion paper include making mediation more readily available for investor-to-State arbitration and assisting developing countries in building expertise in investor-State arbitration.
The discussion paper notes that several of the above-mentioned issues may be addressed by means of provisions in the investment treaties themselves, however it further discusses how such improvements may be made through amendments to the ICSID and Additional Facility Rules. In regard to provisional measures, it notes that “[t]he problem might be addressed by a procedure for the expedited filing of a request for provisional measures and all of the observations of the parties on the request while the tribunal is being constituted so that it may upon its constitution consider and decide on the request within a brief time limit,” and that this procedure could be created through an amendment of ICSID Arbitration Rule 39, on provisional measures.
In terms of the publication of awards, the discussion paper notes that the ICSID Convention provides that ICSID shall not publish an award without the consent of the parties. However, the ICSID Secretariat “actively seeks, and usually obtains, the consent of the parties for such publication.” It further notes that when both parties do not consent to the publication of the award by ICSID, one party usually releases it to other publications such as International Legal Materials or the Journal du Droit International. The discussion paper mentions the possibility of amending ICSID Rule 48(4) to make it mandatory for ICSID to publish excerpts of the awards with or without the consent of the parties in order to make the main holding of the arbitration available to the public as quickly as possible.
In regard to access to investor-to-State arbitration by third parties, the discussion paper observes that it might be useful to amend the ICSID Arbitration Rules and the Additional Facility Rules regarding evidence. These amendments could set forth the conditions under which such submissions are to be made. As for open hearings to the public, the discussion paper observes that such open hearings have been agreed upon by the parties in two cases administered by ICSID, and notes that in some of the more recent investment treaties, the treaties themselves provide for open hearings in all investor-to-State arbitration. The discussion paper notes that under the ICSID Rules at present, one party may veto wider participation at hearings. It suggests that ICSID Arbitration Rule 32(2) and Article 39(2) of the Additional Facility Rules might be amended so that the tribunal would no longer need the consent of both parties in order to permit additional categories of persons to attend.
The discussion paper also raises the question of whether an appeal mechanism “is desirable to ensure coherence and consistency in case law generated in ICSID and other investor-to-State arbitrations initiated under investment treaties.” It notes that “[b]y mid-2005, as many as 20 countries may have signed treaties with provisions on an appeal mechanism for awards rendered in investor-to-State arbitrations under the treaties. Most of these countries are also Contracting State of the ICSID Convention.” In terms of potential negative outcomes of an appeal mechanism, it notes, “[s]ubjecting ICSID arbitral awards to an appeal mechanism might also detract from the finality of the awards and open opportunities for delays in their enforcement.” In any event, the discussion paper suggests that if there is to be an appeal mechanism, it would be best to have a single appeal mechanism rather than multiple appeal mechanisms for reasons of coherence and consistency.
Comments and suggestions regarding the discussion paper may be sent to the ICSID Secretariat by December 15, 2004 via e-mail at icsidideas@worldbank.org (Contact person: Antonio Parra)
Click here for the report.
Click here for EISIL resources on Commercial and Investor-to-State arbitration.