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Case: Forestal Guarani S.A. v. Daros International, Inc.1
Facts: Forestal Guarani S.A., in Argentina, entered into an oral agreement to sell wooden finger-joints
to Daros International, Inc. in New Jersey.2 Forestal sent Daros the products but Daros declined to pay
the full amount.
When Forestal sued Daros in the U.S. for breach of contract, Daros denied owing anything because,
under New Jersey sales law, the contract would have had to be in writing to be enforceable. Further, it
claimed, Argentina had not accepted the CISG’s elimination of the writing requirement when it ratified
the CISG. Since the contract was not in writing, it was also possible that Argentine law applied.
The district court dismissed Forestal’s claim because the parties’ agreement was not in writing.
Forestal appealed.
Issue: Which law applied to this contract—the CISG, Argentine law, or New Jersey law?
Excerpts from Judge Fisher’s Decision:
The CISG applies to contracts of sale of goods between parties whose places of business are in
different States when the States are Contracting States. Because both the United States, where Daros is
based, and Argentina, where Forestal is based, are signatories to the CISG and the alleged contract at
issue involves the sale of goods, the CISG governs Forestal’s claim.
The CISG dispenses with certain formalities associated with proving the existence of a contract.
Specifically, a contract of sale need not be evidenced by writing and it may be proved by any means,
including witnesses.
[But the] elimination of formal writing requirements does not apply in all instances in which the CISG
governs. A Contracting State whose legislation requires contracts of sale to be evidenced by writing
may at any time make a declaration that [that rule] does not apply where any party has his place of
business in that State. The United States has not made [such a] declaration. Argentina, however, has
opted out of [this CISG rule].
There is no dispute here that Forestal’s contract with Daros was verbal at best, so we could feasibly
apply both New Jersey and Argentine law. In the end, we think it unwise to engage in a largely
speculative exercise about the viability of Forestal’s claim under either jurisdiction’s law. Because
these issues deserve a full airing, we conclude that remand is a better course of action.
Question: What types of contracts does the CISG apply to?
Question: What formalities associated with proving the existence of a contract does the CISG dispense
with?
Question: When does the elimination of a formal writing requirement by the CISG not apply?
Answer: A Contracting State whose legislation requires contracts of sale to be evidenced by writing
Application of U.S. Law Abroad
Countries sometimes look to other nations for models when developing laws; however, that doesn’t
mean they want these nations to impose their laws in other countries. As a general rule, U.S. statutes
do not apply abroad, unless they specifically state that they do.
1 613 F.3d 395 United Stated Court of Appeals for the Third Circuit, 2010
2A finger joint is a method of attaching two pieces of wood. Rectangular cut-outs are made in the end of each
piece. Then the pieces are joined together so that the cut-outs on one piece fit the projections on the other. It is as
if you bent your fingers at the knuckle and then slid your hands together.
Extraterritoriality—the power of one nation to impose its laws in other countries
Case: Kiobel v. Royal Dutch Petroleum Co.3
Facts: Throughout the early 1990s, Royal Dutch Petroleum, a Dutch company, and Shell, a British
company, were engaged in oil exploration and production in Nigeria. When local residents protested
the oil companies’ practices, the firms allegedly paid the Nigerian Government to suppress the protests
by beating, raping, killing, and arresting locals.
A group of Nigerian victims of these attacks sued the oil companies in U.S. federal court for violations
of customary international law under the Alien Tort Statute (ATS), a statute passed by the first
Congress in 1789. The ATS allows U.S. district courts to hear certain lawsuits brought by non-U.S.
citizens for violations of international law occurring in the United States or on the high seas, outside
the sovereignty of any country. According to the plaintiffs, the oil companies violated customary
international law and jus cogens by helping the Nigerian Government commit many crimes against
humanity.
The appeals court dismissed the case. The Supreme Court granted certiorari on the question of whether
the ATS permitted U.S. courts to hear a suit for violations of customary international law that occurred
outside the U.S.
Issue: Does U.S. law extend to violations of customary international law occurring entirely outside the
United States?
Excerpt from Chief Justice Roberts’s Decision:4
The question here is whether a claim under the ATS may reach conduct occurring in the territory of a
foreign sovereign. The oil companies contend the [it does] not. They rely primarily on the presumption
of extraterritoriality [whose premise is] that United States law governs domestically but does not rule
the world. This presumption serves to protect against unintended clashes between our laws and those
of other nations that could result in international discord.
We typically apply the presumption of extraterritoriality to discern whether an Act of Congress
regulating conduct applies abroad. The ATS allows federal courts to recognize certain causes of action
based on sufficiently definite norms of international law. But we think the principles of interpretation
constrain courts considering causes of action that may be brought under the ATS.
Since many attempts by federal courts to craft remedies for the violation of new norms of international
law would raise risks of adverse foreign policy consequences, they should be undertaken, if at all, with
great caution. These concerns are all the more pressing when the question is whether a cause of action
reaches conduct within the territory of another sovereign.
There is no indication that the ATS was passed to make the United States a uniquely hospitable forum
for the enforcement of international norms. As Justice Story put it, “No nation has ever yet pretended
to be the custos morum5 of the whole world . . . .” It is implausible to suppose that the First Congress
wanted their fledgling Republic—struggling to receive international recognition—to be the first.
Indeed, the parties offer no evidence that any nation, meek or mighty, presumed to do such a thing.
Moreover, accepting Kiobel’s view would imply that other nations could hale our citizens into their
courts for alleged violations of the law of nations occurring in the United States, or anywhere else in
the world. The presumption against extraterritoriality guards against our courts triggering such serious
foreign policy consequences.
We therefore conclude that the presumption against extraterritoriality applies to claims under the ATS.
Kiobel’s case seeking relief for violations of the law of nations occurring outside the United States is
barred. If Congress were to determine otherwise, a statute more specific than the ATS would be
required.
3 133 S. Ct. 1659 United States Supreme Court, 2013
4For ease of reading, “respondents” has been replaced with “oil companies” and “petitioners” with “Kiobel.”
5In Latin, custos morum means “guardian of manners or morals.”
The judgment of the Court of Appeals is affirmed.
Question: What is extraterritoriality?
Question: What does the Court typically apply to discern whether an Act of Congress regulating
conduct applies abroad?
Question: What does the presumption of extraterritoriality guard against?
You Be the Judge: Carnero v. Boston Scienti!c Corporation6
Facts: Boston Scientific (BSC) is an American company with headquarters in Massachusetts, that
manufactures medical equipment. Ruben Carnero began working at a BSC subsidiary in Argentina
(BSA). Carnero’s employment contract stated that he would be paid in pesos, and that Argentine law
would apply. Four year later, Carnero began working for a BSC subsidiary in Brazil (BSB). Carnero
frequently travelled to Massachusetts, but did most of his work in South America.
BSB, and soon thereafter BSA, fired Carnero. Carnero claimed the firings were in retaliation for
his complaint to BCS executives about inflated sales figures and other accounting fraud at both BSA
and BSB. Carnero filed suit in Massachusetts alleging that his firing violated the Sarbanes-Oxley Act
(SOX), an American law.
SOX was passed in response to corporate fraud at Enron and Arthur Andersen. SOX includes a
whistleblower provision designed to protect employees who informed superiors or investigators of
fraud within the company. The law allows for reinstatement and back pay.
BSC argued that SOX did not apply overseas and the District Court agreed. Carnero appealed.
You Be the Judge: Does SOX protect a whistleblower employed overseas by a subsidiary of an
American company?
Argument for Carnero:
Congress passed SOX because the American people were appalled by the massive fraud in major
corporations, and the resulting harm to employees, investors, the community, and the economy. The
whistleblower protection is designed to encourage honest employees to come forward and report
wrongdoing—an act that no employee wants to do, and one which has historically led to termination.
Mr. Carnero knew his report would be poorly received, but believed he had an ethical obligation to
protect his company. For that effort, he was fired, and now Boston Scientific attempts to avoid liability
using the technicality of corporate hierarchy.
Yes, Mr. Carnero was employed by BSB and BSA. But both of those companies are owned and
operated by Boston Scientific. It is the larger company, with headquarters in the United States, which
called the shots. That is why executives in Massachusetts frequently asked Mr. Carnero to report to
them—and why he brought them his unhappy news.
Argument for Boston Scientific:
The fact that Mr. Carnero was employed by companies incorporated in Argentina and Brazil is more
than a technicality. He is asking an American court to go into two foreign countries—sovereign nations
—and investigate accounting and employment practices of companies incorporated and operating there.
Their laws, not ours, should apply to their companies.
If the United States can impose its whistleblowing law in foreign countries, may those nations
impose their rules here? Suppose that a country forbids women to do certain work. May companies in
those nations direct American subsidiaries to reject all female job applicants? Neither the citizens nor
courts of this country would tolerate such interference.
Mr. Carnero’s request is also impractical. How would an American court determine why he was
fired? Must the trial judge here subpoena Brazilian witnesses and demand documentary evidence from
that country?
6 433 F.3d 1, First Circuit Court of Appeals, 2006.
Finally, SOX does not state that it applies overseas. Congress was well aware that American
corporations operate subsidiaries abroad, but made no mention of those companies when it passed this
statute.
Foreign Laws and Rulings in the United States
What is the proper role of foreign and international law within our borders? Should the decisions of
foreign courts and international law inform our interpretation of our own Constitution?
U.S. judges are not experts in the laws of every country, yet federal courts commonly apply the laws of
other countries to resolve disputes. To address common setbacks when it comes to recognizing and
enforcing foreign judgments, most major trading nations have rules enforcing foreign judgments within
their borders. In the U.S., most states have adopted the Uniform Foreign Money Judgments
Recognition Act to determine when courts will recognize foreign judgments.
Parties who want to avoid courts altogether generally opt for arbitration.
Essential Clauses in International Contracts
International business brings great reward, but it also carries significant risk associated with distance,
language, politics, culture, and different legal systems. However, some of these risks can be controlled
by carefully thinking about contract terms beforehand. Considering the choice of law, choice of forum,
and choice of language and currency are all ways to avoid the risks when negotiating international
deals.
Multiple Choice Questions
1. For which of the following activities can a foreign sovereign be sued?
(a) Operating a factory dangerously
(b) Issuing a law that discriminates against a certain group
(c) Suspending the civil rights of its people
(d) None of the above
2. Outdoor Technologies (an Australian company) obtained a judgment for $500,000 against Silver
Star (a Chinese company) in a court in Australia. Silver Star owned property in Iowa so Outdoor
filed suit in Iowa to collect the judgment. Which of the following statements is true?
(a) Outdoor cannot collect in the United States a judgment that was issued by an Australian court.
(b) Outdoor cannot collect in the United States because Silver is not an American company.
(c) Outdoor can collect in the United States if the Australian court was fair and proper.
(d) Outdoor can collect in the United States, because both the United States and Australia have
common law systems.
3. The President negotiates a defense agreement with a foreign government. To take effect, the
agreement must be ratified by which of the following?
(a) Two-thirds of the House of Representatives
(b) Two-thirds of the Senate
(c) The Supreme Court
(d) A and B
(e) A, B, and C
4. Lynn is an author living in Nevada. She contracted with a company in China, which promised to
print her custom children’s books. After receiving Lynn’s payment, the company disappeared
without performing. Lynn wants to sue for fraud, but the contract does not say anything about
which country’s law will be used to resolve disputes. Both China and the United States are
signatories of the CISG. Will the CISG apply in this case?
(a) Yes, because both countries are signatories.
(b) Yes, because the parties did not opt out of the CISG.
(c) No, because the contract does not involve goods.
(d) No, because the CISG does not establish rules for fraud.
5. Austria, Indonesia, and Colombia are all members of the WTO. If Austria imposes a tariff on
imports of coffee beans from Colombia, but not from Indonesia, is it in violation of WTO
principles?
(a) Yes, the WTO prohibits tariffs.
(b) Yes, the WTO prohibits excise taxes.
(c) Yes, Austria is violating the WTO’s most favored nation rules.
(d) No, the WTO’s most favored nation rules permit Austria to do this.
Case Questions
1. A Saudi Arabian government-run hospital hired American Scott Nelson to be an engineer. The
parties signed the employment agreement in the United States. On the job, Nelson reported that
the hospital had significant safety defects. For this, he was arrested, jailed, and tortured for 39
days. Upon his release to the United States, Nelson sued the Saudi government for personal injury.
Can Nelson sue Saudi Arabia?
Answer: Based on Saudi Arabia v. Nelson (US S. Ct. 1993). The Supreme Court found that FSIA
2. The Instituto de Auxilios y Viviendas is a government agency of the Dominican Republic. Dr.
Marion Fernandez, the general administrator of the Instituto and Secretary of the Republic, sought
a loan for the Instituto. She requested that Charles Meadows, an American citizen, secure the
Instituto a bank loan of $12 million. If he obtained a loan on favorable terms, he would receive a
fee of $240,000. Meadows secured a loan on satisfactory terms, which the Instituto accepted. He
then sought his fee, but the Instituto and the Dominican government refused to pay. He sued the
government in United States District Court. The Dominican government claimed immunity.
Comment.
3. Asante, located in California, purchased electronic parts from PMC, whose offices were in Canada.
When Asante sued PMC for breach of contract, it alleged that California sales law should apply.
PMC argued that the CISG automatically applied because both Canada and the United States have
ratified the treaty. Who is right?
4. During the Spanish-American War, the United States blockaded Cuba. It seized two commercial
fishing vessels sailing under a Spanish flag off the Cuban coast. The crew knew nothing about the
war and had no arms on board. U.S. officials auctioned off the captured vessels, but their owners
protested, claiming that since ancient times countries at war had respected each other’s commercial
ships. There was no law or treaty on this matter. Do the ship owners have a valid claim?
Answer: Since ancient times countries at war had respected each other’s commercial ships. This
5. Many European nations fear the effects of genetically modified foods, so they choose to restrict
their importation. The EU banned the entry of these foods and subjected them to strict labeling
requirements. Does this policy contravene the principles of WTO/GATT?
Answer: The US challenged this practice and WTO ruled that GM food had to be allowed into the
Discussion Questions
1. After reading this chapter, do you believe that international law exists? Has your concept of law
and legal rules changed?
2. After the 9/11 terrorist attacks, the U.S. government imprisoned suspected terrorists in Guantanamo
Bay, Cuba. Officials argued that these detainees did not enjoy constitutional rights because they
were not on U.S. soil, even though they were held by Americans. Are the freedoms guaranteed by
the U.S. Constitution reserved for U.S. citizens on U.S. soil or do they apply more broadly?
3. The United Kingdom has not signed the CISG. Until recently, major world traders like Japan and
Brazil had refused to sign. Imagine that you are a legislator from one of these countries. What
might your objections be to ratifying a treaty on sales law?
Answer: Answers may include the following:
Legal uncertainty caused by introducing a new set of rules of sale
Who will interpret new rules and how? These broadly formulated rules contain many
4. Generally speaking, should the United States pass laws that seek to control behavior outside the
country? Or, when in Rome, should our companies and subsidiaries be allowed to do as the
Romans do?
5. What responsibility, if any, does the United States have to obey international law? Is it any
different from other countries’ responsibility to uphold international law? Why or why not?
