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Decision: The court held it had jurisdiction. The relationship began in Mexico, but continued for
nine years. In-Bond and Hase, although in Mexico, used equipment supplied by and owned by
the Harper. They ran the Mexican plant for Harper under a contract that provided that Illinois
law controls. Parts are shipped from Illinois, to Mexico, and back to Illinois. There were visits by
Add. Case: Matusevitch v. Telnikoff (D., D.C., 1995)--Telnikoff won a judgment for libel
against Matusevitch in British court. He moved to enforce the money judgment in the U.S.
Matusevitch moved for summary judgment.
Decision: Granted. U.S. courts will uphold foreign court judgments unless the law upon which
the judgment was based is “repugnant to the public policies of the ... United States.” British libel
standards are much lower than they are in the U.S. For Telnikoff to win a libel judgment in the
Add. Case: U.S. v. All Funds in Account Nos. 747.034/278 (D. D.C., 2001)--Matta, a citizen of
Spain, is serving three life sentences in federal prison in the U.S. for major drug trafficking. The
government identified three bank accounts in Banco Espanol, a Spanish bank, that contain
money deposited by Matta from his drug dealing. Under a federal law that gives the government
power to seize illegally obtained funds located in other nations, the government brought an in
rem proceeding to effect forfeiture of all funds in the banks. Matta’s wife opposed the forfeiture,
contending that the court did not have subject matter jurisdiction over the bank accounts.
Decision: “The Treaty on Mutual Legal Assistance between the U.S. and the Kingdom of
Spain ... provides for mutual assistance including ‘immobilizing assets’ and ‘assistance in
procedures related to forfeiture.’” The record shows “that the U.S. has received assistance from
Add. Case: Republic of Guatemala v. The Tobacco Institute (D.C. Cir., 2001)--Guatemala
and other nations sued the tobacco companies and the industry’s public relations organization,
seeking to recover the health care costs that they have incurred in treating their citizens’
smoking-related illnesses. They contend that national public policies require them to provide free
health care and other services to all citizens, or at least to those who cannot afford to pay for
such benefits. The nations claim that they should recover the economic harm suffered by their
public health programs under their role as parens patriae, whereby the nations act on behalf of
their citizens against the tobacco industry. The district court dismissed. The nations appealed.
Decision: Affirmed. “The nations’ assertion that they may proceed in parens patriae is a dubious
assertion at best ... parens patriae standing should not be recognized in a foreign nation (by
contrast with a State in this country) unless there is a clear indication by the Supreme Court or
Arbitration—Courts are not effective in resolving many international disagreements. One of the
most effective alternative techniques has been the arbitration process. Attempts to standardize
arbitral rules resulted in creation of organizations such as the U.N. Commission on International
Trade Law, the International Chamber of Commerce, the American Arbitration Association, the
InterAmerican Commercial Arbitration Commission, and the London Court of Arbitration. In
over fifty countries, including the United States, enforcement of arbitral awards is facilitated by
the 1958 U.N. Convention on the Recognition and Enforcement of Foreign Arbitral Awards. U.S.
federal district courts have jurisdiction to entertain motions to confirm or challenge a foreign
arbitration award involving a U.S. business.
Add. Case: Creighton Ltd. v. Government of Qatar (D.C. Cir., 1999)--Creighton, a Cayman
Islands corporation with offices in Tennessee, contracted with the government of Qatar to build
a hospital in Doha, the capital of Qatar. After a dispute over Creighton’s performance, it won an
arbitral award against Qatar from the International Chamber of Commerce in Paris. Creighton
sought to enforce the award in U.S. federal court. Qatar claimed that the court lacks jurisdiction
over the action. The issue ended up before the appeals court.
Decision: The district court has authority to enforce the arbitral award entered by the French
tribunal. A foreign state is immune from the jurisdiction of U.S. courts unless the suit comes
within an exception to the Foreign Sovereign Immunities Act. Qatar did not waive its sovereign
International Court of Justice—Certain disputes may be taken to the International Court of
Justice (ICJ) for resolution. The ICJ is headquartered at The Hague, Netherlands, and is a part of
the United Nations. Only countries have standing to go before the Court; individuals and
businesses have no standing to initiate a suit. The countries decide whether to pursue claims on
behalf of their citizens. IJC decisions providing monetary judgments or injunctive relief may be
referred to the United Nations Security Council for enforcement.
Doctrine of Sovereign Immunity—This allows a court to give up its jurisdiction over foreign
parties that otherwise would be subject to the court’s jurisdiction. This is based on traditional
notions that a sovereign should not be subject to litigation in a foreign court. The application of
the doctrine can have severe consequences on parties when the suit involves a commercial
transaction. The Foreign Sovereign Immunities Act (FSIA) of 1976 is intended to provide a
uniform rule for the determination of sovereign immunity in legal actions in U.S. courts and to
bring the U.S. into conformity with other countries in its application of the doctrine.
Add. Case: Permanent Mission of India to the U.N. v. City of New York (Sup. Ct.,
2007)--Under New York law, real property owned by foreign governments is exempt from taxes
when used exclusively for diplomatic officers or housing for ambassadors to the United Nations.
The City of New York levies property taxes on foreign governments for the portion of diplomatic
office buildings used to house lower-level employees. The government of India refused to pay
those taxes. The City filed a tax lien on the property in state court. India removed to federal
court, contending that, under the Foreign Sovereign Immunities Act (FSIA), the matter had to be
heard in federal court. The trial court ruled against India, as did the appeals court. India
appealed.
Decision: Affirmed. An action seeking declaration of validity of a tax lien against domestic real
property owned by a foreign sovereign invokes the "rights in immovable property" immunity
Add. Case: Keller v. Central Bank of Nigeria (6th Cir., 2002)--Keller, a sales rep for a
company that makes mobile hospitals, fell for a scam from Nigeria that would have supposedly
paid him millions of dollars for a sale worth about 20 percent of the supposed sale total. He lost
about $30,000 by stupidly sending “bank fees” to an account for the Nigerians. He then sued the
Nigerians and the Central Bank of Nigeria (a government agency), as some of the Nigerians in
on the scam were bank officials. Several parties did not respond to the suit; others did. The
district court tossed most of the suit because Keller had “unclean hands” by attempting to
participate in what would obviously be fraud against various other parties should the scam have
been true. The district court allowed his RICO claim to proceed. The Central Bank appealed that
the entire suit should be dismissed because of the FSIA.
Decision: The entire case is dismissed. The government of Nigeria did not agree to be subject to
Add. Case: Corzo v. Banco Central De Reserva Del Peru (9th Cir., 2001)--Novotec is a
Peruvian company that imports goods from the U.S. Money for operations came from a line of
credit from BCRP, the central bank of Peru. Novotec sued BCRP for $400,000 in losses it
suffered due to exchange rate fluctuations. Novotec claimed BCRP promised to cover such
losses. Peruvian courts agreed and the supreme court of Peru affirmed a judgment in favor of
Novotec. It then assigned its interest in the judgment to Corzo. The supreme court then reversed
its holding, stating that the judgment in favor of Novotec was a mistake. This decision caused a
scandal in Peru; the court was attacked by the National Council of the Judiciary, which claimed
that the members of the court were guilty of criminal misconduct. After a decade, nothing
changed. Corzo then sued BCRP in federal court in the U.S. to domesticate the judgment in
order to seize BCRP assets in the U.S., contending that the original decision of the Peruvian
supreme court was valid and enforceable. The court held that BCRP was entitled to sovereign
immunity and dismissed the suit. Corzo appealed.
Decision: Affirmed. The Foreign Sovereign Immunities Act governs this case. Foreign sovereigns
are presumed immune from suit in the U.S. unless one of several exceptions applies. If this case
concerned commercial activity, BCRP may be subject to jurisdiction of U.S. courts under one of
Add. Case: Sutherland v. Islamic Republic of Iran (D.D.C., 2001)--Sutherland was teaching
at a university in Lebanon in 1985 when he was kidnapped at gunpoint by members of the
terrorist group Hizbollah. He spent the next six and one-half years in detention in various secret
prisons in Lebanon, during which time he was tortured. After his release, he, his wife, and his
children sued the Islamic Republic of Iran and its Ministry of Information and Security as the
principals responsible for the multiple tortious injuries to Sutherland and his family because
Iran financially backed and directed Hizbollah. Evidence was presented that Iran spends about
$100 million per year or more supporting such terrorist activities. The Sutherlands sued for
various torts requesting a total of over $50 million in damages. The government of Iran refused
to respond.
Decision: Judgment for the Sutherlands. Foreign sovereign immunity is suspended by Congress
for personal injuries “caused by an act of torture, extrajudicial killing, aircraft sabotage,
hostage taking, or the provision of material support or resources ... for such an act.” Expert
Add. Case: Janini v. Kuwait University (D.C. Cir., 1995)--Janini, a U.S. citizen was hired by
Kuwait University (a part of the government of Kuwait) to teach chemistry on a four year
employment contract, from 1989 to 1993, that contained a nine month termination notice. In the
summer of 1990, Iraq invaded Kuwait, making teaching impossible; Janini was in the U.S.
during the war. In 1991, the Kuwaiti government announced that it cancelled all contracts with
foreign workers because of impossibility caused by the war, a case of force majeure. Janini was
fired, by letter, in August 1991. Janini sued for breach of contract, suing the university in federal
court. The university moved to have the suit dismissed under the Foreign Sovereign Immunity
Act. District court granted the motion. Janini appealed.
Decision: Reversed. An exemption from the Act is provided by §§1605-07, which holds that
foreign states are not “immune from the jurisdiction of the courts of the United States ... in any
case ... in which the action is based upon a commercial activity.” The termination of an
Add. Info: Doctrine of Act of State: Is similar to the sovereign immunity doctrine in that it
creates a bar to compensation by foreign investors who have sustained losses in host countries.
However, the doctrine of act of state may create a partial as well as a complete bar to a claim. It
embodies the principle that a country must respect the independence of other countries and that
courts of one country may not judge the validity of the regulatory acts of another country’s
government undertaken within its own territory.
Add. Case: Banco Nacional De Cuba v. Sabbatino (S. Ct., 1964)--Farr, an American
commodities broker, contracted to buy Cuban sugar from C.A.V., a Cuban sugar company mostly
owned by U.S. citizens. Farr agreed to pay for the sugar in New York after receiving appropriate
shipping documents. After the contract was signed, Congress imposed a reduction in the sugar
quota. The Cuban government viewed the reduction as an act of aggression by the U.S.
government and nationalized the Cuban sugar industry, including C.A.V. The decree held that all
ships carrying sugar from Cuban ports must have the consent of the Cuban government before
leaving. To meet this requirement, Farr had to enter into a contract with the Cuban government
bank, Banco Nacional de Cuba. Banco Nacional presented the shipping documents to Farr in
New York and demanded payment. The same day, C.A.V., on behalf of its American’ shareholders
who stood to lose their investment because of the nationalization, notified Farr that it was the
rightful owner of the sugar and was entitled to the payment. Sabbatino was C.A.V.’s
representative. Farr gave the payment to Sabbatino. Banco Nacional then sued to recover the
payment from Farr. The federal district court found that the Cuban nationalization decree
violated international law and ruled against Banco Nacional de Cuba. The court of appeals
affirmed. Banco Nacional appealed to the U.S. Supreme Court.
Decision: Reversed. The act of state doctrine prohibits a foreign judicial body from ruling on the
validity of the acts of a sovereign undertaken within the sovereign’s territories. Both the national
Discussion Question
Traditional judicial forums have not been effective in resolving many international commercial
disputes. Litigation is complicated because evidence, people, and documents central to the
dispute are often located in two or more countries. Many foreign courts are highly political.
Establishing jurisdiction can also prove to be difficult. Further, cost considerations, procedural
and substantive barriers to relief, delays, and legal uncertainties can all make litigation an
unattractive alternative. As a consequence, arbitration has gained popularity. More parties to
international contracts look to arbitration for the resolution of commercial disputes, largely
because of greater neutrality and efficiency. The international business community is working to
standardize arbitration rules and procedures. Many contracts provide for the resolution of
disputes under rules established by the International Chamber of Commerce. Still, arbitration can
be expensive for small businesses. Often a substantial payment is required up-front to cover the
fees and expenses of the arbitrators and the organization hosting the arbitration. Fees can be in
excess of $300,000—beyond the reach of most small companies especially in small dollar
disputes.
Case Questions
1. The Supreme Court affirmed the decision to refuse to decline jurisdiction based on the forum
clause in the contract. The forum selection clause did not compel the district court to stay
proceedings in the action so that the parties might litigate in England pursuant to its provisions.
The Court emphasized that the contract was written in the area and the flotilla never left the area,
a number of the crew reside in the area, preparations for voyage were made in the area, and
repair and inspection of the damage after the accident were done there. The only other nation
2. (answer on Internet for students) Seawinds sued Nedlloyd in California state court alleging in
essence that Nedlloyd breached express and implied obligations under the shareholders’
The supreme court of California held that a valid choice-of-law clause existed in the contract
between the parties. Since the clause is valid, it encompasses all causes of action arising from or
related to their contract regardless of how those causes of action are characterized. The court
applied the Restatement test: first, the court must determine (1) whether the chosen state has a
3. Second Circuit ordered the case dismissed. The forum-selection provision naming Greece as
the forum was reasonable and did not deprive Effron of a day in court. It is reasonable for an
4. (answer on Internet for students) This case serves to illustrate how complicated a relatively
simple transaction can become when it involves an international transaction with a letter of
credit. There were three banks involved here:
a. The Liberty Bank—worked directly with the U.S. buyer, Anderson-Prichard. It issued a letter
b. The Bank of America—it received the letter from Liberty and reissued its own letter to Union
c. Union Bank of Switzerland— it received the letter from Bank of America, and would pay
Union paid for two purchases and was reimbursed by BOA according to the letter of credit.
Because of alleged difficulties in the bills of lading and in the quality of the product, Liberty
refused to pay, raising highly technical arguments to the letter of credit, to which the court
responded:
“Although there is a line of authority which could be interpreted to require that each “t” be
crossed and each “i” be dotted by any and all banks dealing with letters of credit and drafts
The relationship between Union and BOA is independent of the relationship between BOA and
Liberty; where specific documents are called for in a letter of credit, nothing short of production
5. Affirmed. When faced with a request to refer a dispute to arbitration under the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards, the court make a very limited
inquiry to be sure there 1) is a written agreement to arbitrate the subject of the dispute; 2) the
6. (answer on Internet for students) The court rejected the bank’s sovereign immunity and act of
state arguments. “Foreign states and their agencies an instrumentalities are generally immune
“No one disputes that the regulation of imports and exports is a sovereign prerogative; or that the
bank has the power to redefine investment priorities; or that the bank, in administering the
Jamaican Economic Recovery Program, must decide with whom it will deal. These are all
The next issue was whether the bank’s acts in dealing with Chisholm had sufficient jurisdictional
nexus with the U.S. In international commerce, much business is conducted through telephone
7. Affirmed. The factors weigh in favor of finding Mexico to be an adequate forum. The
accident occurred in Mexican waters. The ship was under the control of a Mexican company.
PCA did not control the operation of the ship. Sandria was a citizen of Mexico, working for a
8. (answer on Internet for students) Affirmed. A tort based on negligence is not one of the
exceptions allowed under the FSIA. While the tort, if any, was probably the responsibility of the
Ethics Question
A conflict over moral beliefs can be hard to resolve, particularly in commercial relations. The
production of a product may involve placing workers at some personal peril, causing the
While an individual cannot change the moral beliefs of another, in a business environment such
Internet Assignment
Library of Congress:
www.loc.gov/
World Trade Organization (WTO):
www.wto.org/
Organisation for Economic Co-operation and
Development (OECD):
www.oecd.org/home/
The Internet provides a massive amount of international law information for researchers. For
example, you can find a legal guide to Afghanistan using the Library of Congress Web site. For
finding international agreements, use the Web sites of the WTO and the OECD.
