978-1285860381 Chapter 3 Solution Manual Part 2

Unlock access to all the studying documents.

View Full Document

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

(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.

(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

(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.

(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.

(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?