Embassy Law Web Log   
Washington, DC, USA      

Non-Suit in Development Assistance

Unsurprisingly, the United States District Court for the District of Columbia dismissed a lawsuit against an international organization under the International Organizations Immunities Act, the counterpart to the Foreign Sovereign Immunities Act for states, when Indians sought compensation for various damages allegedly resulting from the development assistance granted for a power station in their region. On March 24, 2016, the court filed a 13-page opinion in Budha Ismail Jam v. International Finance Corporation, which outlines the basic concepts of the immunities protecting an arm of the World Bank in Washington, DC. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

Forum Non Conveniens and the Foreign Sovereign Immunities Act

On January 22, 2016, the United States Court of Appeals for the Second Circuit in New York upheld the decision of the lower court in the matter of Bahgat v. Arab Republic of Egypt. The plaintiffs -- Dr. Ahmed Baghat, his three children, and his company, Global One Limited -- as well as the defendants -- the Arab Republic of Egypt and the National Bank of Egypt -- are all Egyptian parties. Therefore, in the initial judgment of the United States District Court for the Southern District of New York, the district court dismissed the suit brought by the plaintiffs on the grounds that the defendants were protected by the Foreign Sovereign Immunities Act. An alternative ruling concluded that the suit should be dismissed under the doctrine of forum non conveniens.

A forum non conveniens ruling is made when a case is better suited to be heard in a different court, or forum. The court of appeals affirmed the forum non conveniens decision and concluded that the case should be heard in an Egyptian forum.

The appellate court's decision to affirm the judgment was based upon several factors. To begin, a district court's decision to dismiss a case under forum non conveniens is made using a three-step analysis:

At step one, a court determines the degree of deference properly accorded the plaintiff's choice of forum. At step two, it considers whether the alternative forum proposed by the defendants is adequate to adjudicate the parties' dispute. Finally, at step three, a court balances the private and public interests implicated in the choice of forum.

Thus, owing to the fastidiousness of the aforementioned three-step analysis, the court of appeals gives substantial deference to a district court's decision to dismiss a case for forum non conveniens. The court writes, [w]e will only reverse if the trial court has 'clearly abused its discretion.'

In this matter, the court compared potential abuses of discretion to the three-step analysis described above. Because the majority of the plaintiffs currently reside in Egypt, the political unrest in Europe had no potential damaging effects on the dispute, and because all the relevant information regarding the case is located in Egypt and would thus require substantial knowledge of Egyptian law, the court of appeals determined that the suit is, indeed, better suited for an Egyptian forum rather than a United States court. -- Kathryn Campbell, Legal Assistant, Berliner Corcoran & Rowe LLP, Washington, DC.

The Direct-Effect Clause in the FSIA

In Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC, the United States Court of Appeals for the Second Circuit in New York City confirmed subject-matter jurisdiction of the district court over a foreign government-owned sovereign wealth fund under the direct-effects clause of the Foreign Sovereign Immunities Act, quoting the Supreme Court in Republic of Argentina v. Weltover, 504 U.S. 607, (1992):

Under the direct‐effect clause, a foreign state is not immune from jurisdiction if the plaintiff's "lawsuit is (1) 'based upon … an act outside the territory of the United States'; (2) that was taken 'in connection with a commercial activity' of [the foreign state] outside this country; and (3) that 'cause[d] a direct effect in the United States.'""
The required facts for the direct effect of foreign acts in the United States are often disputed, but in this matter involving commercial notes, securities, a bankrupt foreign bank and representations to investors, the facts clearly pointed to effects in the United States where investors obtained interests in the securities and suffered the alleged harm. The February 3, 2016 decision rests in part on the recent Supreme Court precedent in OBB Personenverkehr AG v. Sachs, 136 S.Ct. 390 (2015). -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

Enforcement into Foreign State's U.S. Assets

On January 15, 2016, the United States Supreme Court published the transcript and audio recordings of its January 13, 2016 hearing in the Bank Markazi v. Petersen case. The bank argued that Congress acted unconstitutionally when it created a law for the enforcement of a specific judgment for damages into the assets of Iran. A decision is expected before the end of the current term of the Supreme Court. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

Can Embassy Visits Change Extradition Law?

Would a foreign fugitive's regular visits to his embassy avoid tolling the statute of limitations on the alleged crimes for which his home country has requested his extradition? In the matter USA v. Liuksila, a Finnish citizen in Washington argued that the statute of limitations had run.

He may have been absent from Finland but through his embassy contacts had been available to Finnish authorities, and he had also cooperated with a Finnish detective. Since he remained available to them, he suggested, he was not truly absent from Finland. Therefore, the tolling effect could not have occurred, the statute had run and he could no longer be extradited from the United States to Finland, he claimed.

In a 14-page opinion of January 5, 2016, the United States District Court for the District of Columbia analyzed the law in light of these facts and concluded that the mere absence from Finland is determinative. Visits to the embassy do not have the same effect as returning to the jurisdiction seeking extradition! -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

Comity for Sovereign's Acts

On January 5, 2015, the United States Court of Appeals for the Second Circuit in New York City ruled that a federal judge had not appropriately considered the validity of trademark transfers under Russian law in the matter of Fed. Treasury Enter. Sojuzplodoimport v. Spirits Int'l B.V.. Bearing in mind the ideas of state sovereignty and comity, Judge Dennis Jacobs writes: …the US District Court for the Southern District of New York erred in considering whether the asserted basis for standing to pursue the section 32(1) claims was valid under Russian law.

During the prime of the Soviet Union, the Soviet enterprise known as VVO-SPI obtained a trademark in the United States in order to sell its vodka Stolichanya through various US distributors such as PepsiCo. VVO-SPI eventually assigned the trademark licenses to PepsiCo from 1990 to 2000.

The subsequent collapse of the Soviet Union in the early 1990s led to widespread privatization of various Soviet enterprises, purportedly including VVO-SPI, which ultimately became controlled by SPI International. As successor in interest to VVO-SPI, SPI International claimed ownership of the Stolichanya trademarks. After discontinuing the licensing agreement with PepsiCo in 2000, SPI sold the trademark rights to the Dutch company Allied Domecq. However, in 2001, a court in the Russian Federation ruled that VVO-SPI had not actually been privatized. In response to the ruling, the Russian Federation established the agency and VVO-SPI successor known as the Federal Treasury Enterprise Sojuzplodoimport in an effort to reclaim the trademarks. FTE and Cristall - a company that FTE had entered into exclusive licensing agreements with - sued Allied Domecq, its subsidiaries, and SPI International.

In the US District Court for the Southern District of New York, FTE laid claim to the Stolichnaya vodka trademarks that originated during the Soviet Union, arguing violations of section 32(1) of the Lanham Act, as well as other federal and state law claims. Ultimately, the district court dismissed all the claims, citing incontestability of the trademarks due to the duration of the trademark's existence.

A subsequent issuance of a Decree by the Russian Federation on behalf of FTE led to the vacating of the dismissal of section 32(1) claim. As Judge Jacobs writes:

The Degree and Assignment were indisputably acts of a foreign government. The declaration of a United States court that the executive branch of the Russian government violated its own law by transferring its own rights to its quasi-governmental entity (FTE) would be an affront to the government of a foreign sovereign.
The court further cited a potential violation of foreign sovereignty, stating,
The doctrines of comity and act of state preclude a United States court from invalidating an action of a foreign sovereign with respect to a transfer of rights among its branches or entities on the ground that the transfer is invalid under the law of that foreign sovereign.
Put simply, the ruling acknowledges the power of the sovereign state and its government - a factor that cannot be ignored in a United States Court. The case, in regards to the section 32(1) claim, has been remanded for further proceedings. -- Kathryn Campbell, Legal Assistant, Berliner Corcoran & Rowe LLP, Washington, DC.

State Wins Stay of Enforcement After Arbitration

The November 3, 2015 decision in Getma International v. Republic of Guinea by the United States District Court for the District of Columbia illustrates usefully the conditions for a stay of excution of a disputed arbitral award. The District Court determined that the main conditions for the enforcement of the foreign award existed but it accepted the limitations established by the Federal Arbitration Act, namely an application of discretion.

Relying on the factors established by the United States Court of Appeals for the Second Circuit in Europcar Italia, S.p.A. v. Maiellano Tours Inc., 156 F.3d 310, 316-17 (2d Cir. 1998), the court carefully examined six EuropCar factors. It concluded that the dispute surrounding the award counseled against confirmation and enforcement. However, it noted that staying these proceedings indefinitely could be seen as an abuse of discretion. See Belize Soc. Dev. Ltd. v. Gov't of Belize, 668 F.3d 724, 732-33 (D.C. Cir. 2012) and limited the stay for a period through April 30, 2016. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

FSIA Attachment After Judgment Against State

Arguments in two cases rolled into one decision in Owens v. Republic of Sudan, decided by the United States District Court for the District of Columbia on October 28, 2015. The disputed issue is whether plain­tiffs with default judgments in hand against Iran and Sudan may initiate the attach­ment into American property of these nations.

The plaintiffs gave proper notice; the court observed that suffi­cient time lapsed between notice under 28 USC §1608(e) and the appli­cation to initiate attach­ment. Sudan objected because the nation belatedly had moved to challenge the default judgment.

Sudan raised several concerns, based on the statute in 28 USC §1610(c), the legislative history of the Foreign Sovereign Immunities Act and its presentation by then-Legal Adviser Monroe Leigh, and comity. Ultimately, the court rejected these objections in a reasoned opionion after also taking issue with diverging views by the United States Court of Appeals for the Seventh Circuit in Rubin v. Iran, among others. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.

Supreme Court Oral Argument Audio Files

The audio files from the oral argument before the Supreme Court of the United States in the Foreign Sovereign Immunities Matter involving a railroad accident in Austria became available today on the court's website. The matter is OBB Personenverkehr AG v. Sachs.

Embassy Duty to Preserve EMails

When litigation in U.S. courts looms, parties need to preserve and protect evidence, including emails. Does an embassy need to follow this procedural rule despite the sanctity of its documents under the Vienna Convention of 1961? Or will it be subject to sanctions by an American court if it follows its own organizational procedures in destroying emails under standard procedures imposed by its foreign office?

An opportunity to explore this conflict presented itself in the matter Ashraf-Hassan v. Embassy of France but the September 17, 2015 decision by the United States District Court for the District of Columbia avoided addressing the potential conflict and an exploration of an embassy's right to self-organization which many jurisdictions consider a generally accepted principle of international law.

Both parties had requested sanctions against each other, for failing to preserve evidence. The court found that sanctions were not appropriate in this matter because the case would not be heard by a jury. In a bench trial, there is no risk of misleading a jury. In any case, the court held, clear notice of imminent litigation was not given before the emails at the defendant embassy were destroyed under the data protection laws of France in its ordinary course of administration.

Interestingly, both parties requested in their motions in limine only that the court draw adverse inferences for lost correspondence. The court declined. With respect to the plaintiff's request, it noted that the plaintiff has the burden of proof which it can attempt to meet with evidence other than the lost writings. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.