Embassy Law Web Log   
Washington, DC, USA      

Embassy Counsel to Pay Punitive Damages

On May 27, 2005, the number two court in the United States confirmed the assessment of punitive damages against an attorney who had agreed to represent Rwanda in a lobby matter shortly before the Rwandan embassy in Washington was closed and the diplomats were sent home by note verbale. Under a new agreement, the lawyer was to assist embassy personnel with immigration issues. The new Rwandan government demanded a refund of advances paid and later sued the lawyer to recover its payments.

The court confirmed the lower decision which held that the lawyer improperly refused the refund, ignored a conflict of interest in representing the diplomats personally when their government was the client, misrepresented the work performed and fees earned and participated in the violation of fiduciary duties.

While the court confirmed the assessment of punitive damages and the requirement to refund fees, its decision in the matter of The Government of Rwanda v. Robert Winthrop Johnson II, 04-7044, 04-7067, appears lenient.   -   by Clemens Kochinke, Berliner, Corcoran & Rowe, LLP, Washington, DC.

Dretke Dismissed

On Monday, May 23, 2005, the Supreme Court of the United States dismissed as improvidently granted the pending review of Medellin v. Dretke, docket 04-5928.

Thus, the court declined to get involved in a showdown between the state and federal governments over the presidential power to instruct state governments to abide by international treaties. SCotUS published a detailed analysis.   -   by Clemens Kochinke, Berliner, Corcoran & Rowe, LLP, Washington, DC.

Diplomatic Driver in Accident

In New York, the owner of a motor vehicle is vicariously responsible for damages that another party suffers as a result of an accident. Other states, such as Michigan, have similar rules. The common law absolves the owner in most instances of such liability. Recently, the federal court of appeals for the third circuit held that the interest of New York in its vicarious liability rules is strong enough to subject out of state owners to its laws even if a car rental and an accident occur outside of New York. On May 5, 2005, the highest court of New York arrived at the same result in a matter involving a driver who is a diplomat.

In the matter of Svetlana Tikhonova v. Ford Motor Company, docket number 54, the court held the owner vicariously liable for the damages suffered by a passenger in the car driven by a Russian diplomat who enjoyed immunity from suit under 22 USC §254d. Ford argued that the owner could not be vicariouly liable if the driver was immune. The passenger would be limited to collecting damages from the driver's or embassy's insurer, under 28 USC §1364.

The court held otherwise, relying on the language of §388 of the New York Vehicle and Traffic Law and dismissing Ford's argument that the exceptions carved out by courts to the rule should apply, such as those for co-employees or emergency workers.   -   by Clemens Kochinke, Berliner, Corcoran & Rowe, LLP, Washington, DC.

Consular Notification

The State Department site continues to provide detailed information on consular notification in the United States of foreign consuls under the Vienna Convention on Consular Relations and Optional Protocols, U.N.T.S. Nos. 8638-8640, vol. 596, p. 262-512, dated April 24, 1963, but nothing on the retraction of its accession to the optional protocol.

The key issue today is whether the United States would continue to apply the contested notification rules in the event of arrests of foreign nationals in the United States. At Voice of America, David Gollust reports in Bush Administration Defends Decision to Withdraw from International Legal Protocol, on March11, 2005, that the United States believes that its application of the protocol in the case of US citizens held by Iran was proper while foreign insistence on its application in the United States amounts to improper interference. After all, the American legal system is a good one, many Americans believe. There appears to exist some concern over misuse of the optional protocol by foreign nations, or the International Court of Justice in cases such as Avena and Other Mexican Nationals, because of their opposition to the death penalty, statements by Secretary of State Rice and a departmental spokesman, Adam Ereli, seem to indicate.

Is the view expressed by Amnesty International accurate? USA: another "double standard" on consular rights?, says its press release. The true impact will likely depend on the wording of the note from the State Department. Rice had indicated that the consular notification process will continue. And the United States will want consular notification in the event of arrests by Americans abroad.   -   by Clemens Kochinke, Berliner, Corcoran & Rowe, LLP, Washington, DC.

Fortune's Fate

On February 22, 2005 U.S. District Court in Washington, D.C. decided the case of Augustin B. Jombo v. Commissioner of Internal Revenue Service. The decision further clarifies the concept of constructive receipt of income in the United States income tax code.

In 1989 Mr. Jombo, then a clerk at the Nigerian Consulate in New York , won a $26 million lottery jackpot. New York state law at the time prohibited lump sum payouts and Mr. Jombo won the right to receive $1.2 million a year for 20 years. In 1996, Mr. Jombo, who had since become a permanent U.S. resident and a cash account method tax payer, contested the inclusion of the $1.2 million payment in his annual income. He claimed the full $26 million was constructively received in 1989 when he still had diplomatic tax status. The court, unconvinced, found that the date of constructive receipt could not be considered 1989, as the winnings were still subject to substantial constraints preventing him from drawing on the income. Additionally, the court relied on 26 C.F.R. 1.446-1 (c) (1) (1) which states that all income received constructively or actively in a year is taxable as gross income. The court ruled that the annual payments of $1.2 million were gambling winning which could be taxed annually as part of gross income.   -   by Sally Laing, legal assistant, Berliner, Corcoran & Rowe, LLP in Washington.

Breach of Contract Claim Against Honduras Dismissed

In the matter Samco Global Arms, Inc. v. Carlos Arita, Procuraduria General de la Republica, Republic of Honduras, docket numbers 03-15283 & 03-16297, the United States Court of Appeals for the Eleventh Circuit ruled on January 5, 2005 on the claim of the plaintiff arms dealer against the foreign state for breach of contract which the lower court had dismissed without prejudice under the Foreign Sovereign Immunities Act, 28 USC §1602 et seq., and which it also found to be barred by the Act of State doctrine.

Samco had purchased the arms from a foreign dealer which had stored them with the armed forces of Honduras. During a criminal investigation, the arms could not be retrieved; they also became the subject of an attachment for attorneys fees. These factors as well as damage to the arms while in storage caused Samco to claim damages for breach of contract.

The appellate court affirmed, although it determined that the storage contract as a contract for the sale of goods or services constituted a commercial activity excepted from FSIA immunity. The commercial acts of the state did not constitute, however, acts that caused a direct effect in the United States under 28 USC §1605(a)(2).   -   by Clemens Kochinke, partner, Berliner, Corcoran & Rowe, LLP in Washington.

Act of State Mandamus

A rare mandamus action triggered a discussion of the reach of the Act of State doctrine enuanciated in Underhill v. Hernandez, 168 US 250, 252 (1897), In re: Philippine National Bank, docket Number 04-71843, decided February 4, 2005 by the United States Court of Appeals for the Ninth Circuit.

In American litigation over Marcos assets, the lower court wanted to hold the bank in contempt in a proceeding to which the bank was not a party, and to depose its officers. The bank applied for the writ of mandamus.

The appellate court found that a ruling on the assets by the Philippine Supreme Court which the lower court effectively overruled enjoys the protection of the Act of State doctrine. Classically, the Act of State doctrine is directed at the executive and legislative branches. The Court held, however, that there is no inflexible rule preventing a judgment sought by a foreign government from qualifying as an act of state, referring to Liu v. Republic of China, 892 F.2d 1419 (9th Cir. 1989) and the Restatement (Second) of Foreign Relations of the United State §41 cmt. d (1965).

As a result, the Court held that the district court's error qualifies for correction by a writ of mandamus, supra at 1573.  -   by Clemens Kochinke, partner, Berliner, Corcoran & Rowe, LLP in Washington.

Russian Tit for Tat

On January 17, 2005, Russian new agency Novosti reports in its German-language internet edition on a bill to introduce a statute similar to the American Foreign Sovereign Immunities Act that will permit foreign nations to be hailed into Russian courts just as the FSIA permits such actions in the United States. Currently, Russian law reportedly prevents such actions except with the consent of the defendant sovereign. The principal motive is said to be the need to harmonize the Russian system with the American procedure. I could not find this report in the English-language edition of the Russian News and Information Agency.   -   by Clemens Kochinke, partner with Berliner, Corcoran & Rowe, LLP in Washington.