• Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

U.S. District Court for the District of Arizona

• United States v. Arizona (July 6, 2010)

International Centre for Settlement of Investment Disputes

• Sempra Energy International v. Argentina (June 29, 2010)

United States District Court for the District of Columbia

• Argentina v. BG Group (June 7, 2010)

United States Supreme Court

• Morrison v. Nat’l Australia Bank Ltd. (June 24, 2010)

• President of the Asian Society of International Law, H. E. Xue Hanqin, Elected as Member of the International Court of Justice (June 29, 2010)

Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010

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President Obama signed into legislation the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 imposing new sanctions on Iran for its continued failure to suspend the nation’s uranium enrichment program, nuclear weapons program, and other illicit nuclear activities. The Act amends the Iran Sanctions Act of 1996 and expands the already existing sanctions regime against Iran.

U.S. District Court for the District of Arizona

United States v. Arizona (July 6, 2010)

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The United States government has responded to a recent anti-immigration law in Arizona (S.B. 1070) by asking the U.S. District Court for the District of Arizona to issue a preliminary injunction to enjoin enforcement of the legislation. In its memorandum in support of the injunction, the government reaffirmed its view that the federal immigration policy of the United States reflects a balance of national law enforcement, foreign relations, and international humanitarian concerns.

S.B. 1070 is Arizona’s attempt to create a state immigration policy, whose purpose is to deter the unlawful entry and presence of aliens. According to the U.S. government, this law not only interferes with the federal government’s exclusive authority to establish the nation’s immigration policy, but, on an international level, also significantly undermines U.S. foreign policy objectives and diplomatic affairs. The memorandum states that the negative effect of S.B. 1070 on U.S. foreign policy has been immediate. Specifically, the government argues that its passage has caused hostility from foreign nations whose citizens are targeted and may cause strain on diplomatic ties. As a result of this enactment, bilateral agreements between the United States and Mexico concerning natural disasters, transnational gangs, and other cross-border issues have been discouraged.

The memorandum also emphasizes that the enforcement of S.B. 1070 would hinder U.S. interests in international trade, security, tourism, and, more importantly, the advancement and protection of human rights. Furthermore, it would gravely undermine U.S. humanitarian concerns by allowing Arizona authorities to arrest and detain aliens seeking asylum or protection under the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment. Thus, the government argues, preliminary injunctive relief of S.B. 1070 is necessary to protect compelling U.S. national and global interests.

International Centre for Settlement of Investment Disputes

Sempra Energy Int’l v. Argentina (June 29, 2010)

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An International Centre for Settlement of Investment Disputes ad hoc committee has annulled a 2007 arbitration award against Argentina on the ground of manifest excess of powers (Article 52(1)(b) of the ICSID Convention). The committee concluded that the tribunal had failed to apply Article XI (necessity) of the U.S.-Argentina bilateral investment treaty (BIT).

The dispute between the parties arose when Argentina instituted economic reforms in early 2000 to deal with an unprecedented economic downturn. Several investors, including Sempra Energy International (“Sempra”), suffered financial losses caused by the new fiscal measures. In September 2002, Sempra requested that the dispute be arbitrated under the ICSID Convention. In 2007, an ICSID tribunal found in favor of Sempra, ruling that the reforms had “substantially changed the legal and business framework, under which the investment was decided and implemented,” resulting in a breach of the fair and equitable treatment standard of Article II (2)(a) of the BIT. The tribunal also found that Argentina breached the Umbrella Clause of Article II (2)(c) of the BIT.

Argentina filed an application requesting annulment of the 2007 award on grounds that 1) the tribunal was improperly constituted; 2) the tribunal manifestly exceeded its powers; 3) a significant departure from a fundamental rule of procedure had occurred; and 4) the award failed to state the reasons on which it was based.

The ad hoc committee sided with Argentina, concluding that the original tribunal, by failing to apply relevant treaty provisions, had committed a manifest excess of powers. The committee ordered Sempra to reimburse Argentina for all expenses incurred during the annulment proceedings, including fees and expenses of the arbitrators.

United States District Court for the District of Columbia

Argentina v. BG Group (June 7, 2010)

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The U.S. District Court for the District of Columbia has rejected Argentina’s petition to vacate or modify an arbitration award issued in favor of BG Group PLC (“BG Group”), a United Kingdom company that had invested in a gas distribution company in Argentina and subsequently suffered financial losses when Argentina reformed its economic regime.

The original international arbitration was instituted by BG Group in 2003 and the proceedings, which were held both in New York and Washington D.C., started in 2006. In December 2007, an arbitral panel unanimously ruled in favor of BG Group and awarded the company damages in the amount of $185,285,485.85 plus costs, attorney fees, and interest. Argentina filed a petition to vacate or modify the award in March 2008, asserting several arguments under the U.S. Federal Arbitration Act (9 U.S.C. § 10(a)) (“FAA”), which governs the court’s authority to vacate an arbitral award.

Vacating an award is difficult under U.S. law. First, the FAA grounds for vacating, modifying, or correcting arbitral awards are exclusive. Hall St. Ass’n LLC v. Mattel, Inc., 552 U.S. 576, 581 (2008). Secondly, courts will not vacate an award so long as “‘some colorable support for the award can be gleaned from the record’” (quoting LaPrade v. Kidder, Peabody & Co., 94 F. Supp. 2d 2, 4–5 (D.D.C. 2000)). For Argentina, this precedent meant that it had to demonstrate that the arbitrator disregarded the agreement in question and instead “dispense[d] his one brand of industrial justice’” (quoting Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 2010 WL 1655826, at *7 (U.S.)). Reviewing the evidence presented by Argentina, including claims that one of the arbitrators commonly ruled against Argentina in similar cases, the court held that Argentina had not met its burden and denied Argentina’s petition.

In its concluding remarks, the court affirmed its limited authority to afford the remedy sought by Argentina: “To be sure, under a more searching, appellate-style review, the arguments presented by Argentina . . . could very well carry the day. But, because the Court in this circumstance does not sit like ‘an appellate court does in reviewing the decisions of lower courts,’ . . . the Court has no choice but to deny the relief sought . . . .”

United States Supreme Court

Morrison v. Nat’l Australia Bank Ltd. (June 24, 2010)

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The U.S. Supreme Court ruled in Morrison. v. Nat’l Australia Bank Ltd. that Section 10(b) of the Securities and Exchange Act of 1934 (“SEA”) does not provide a cause of action to foreign shareholders in actions against American or foreign companies for deceptive practices in securities trade on foreign exchanges.

National Australia Bank (“NAB”), an Australian corporation that owned a Florida subsidiary mortgage servicing company, was sued by Australian and American shareholders for allegedly violating Sections 10(b) and 20(a) of the SEA. The subsidiary allegedly and with the knowledge of NAB manipulated financial models and misrepresented its own value. In 2001, NAP had to write down the value of the subsidiary’s assets to reflect the actual value. This in turn decreased the value of NAB’s shares, which were not listed in any American stock exchange, and resulted in financial losses to the shareholders.

Before reaching the Supreme Court, the case was dismissed by the Second Circuit for lack of subject matter jurisdiction. On appeal, the shareholders argued that the SEA applied to the securities fraud even if the transactions were concluded abroad. NAB, however, claimed that there is a presumption against extraterritorial application of U.S. legislation.

The Court agreed with NAB, ruling that Section 10(b) applied “only to transactions in securities listed on domestic exchanges and domestic transactions in other securities.” According to the Court, “[t]he Exchange Act’s focus is not on the place whether the deception originated [here Florida], but on purchases and sales of securities in the United States.”

President of the Asian Society of International Law, H. E. Xue Hanqin, elected as Member of the International Court of Justice (June 29, 2010)

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The United Nations Security Council and the General Assembly elected Xue Hanqin, the President of the Asian Society of International Law and member of the International Law Commission, to fill a vacancy in the International Court of Justice (ICJ). She replaces Judge Shi Jiuyong.

We recently reported that the U.S. National Group nominated Joan E. Donoghue, the State Department’s Principal Deputy Legal Adviser and an ASIL member, to serve as a Judge on the International Court of Justice (ICJ). If elected, she will replace ICJ Judge Tomas Buergenthal.

There are currently no women serving on the ICJ. If elected, Xue and Donoghue would become only the second and third woman to serve as ICJ judges in the history of the Court.

For more information on the ICJ appointment procedure, see a recent ASIL Insight.