Trends In International Litigation : International Business Lawyer & Attorney : Ed Joffe : Joffe & Joffe Law Firm : Miami, Florida Global Customs & Trade Issues

From 1980 to 1986 petitioner Mohamed Ali Samantar was the First Vice President and Minister of Defense of Somalia, and from 1987 to 1990 he served as its Prime Minister. Respondents are natives of Somalia who allege that they, or members of their families, were the victims of torture and extrajudicial killings during those years. They seek damages from petitioner based on his alleged authorization of those acts.

The narrow question before the Supreme Court was whether the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1330, 1602 et seq., provides petitioner with immunity from suit based on actions taken in his official capacity. The High Court found that it does not.

The opinion noted, however, that the suit may still be barred by foreign sovereign immunity under the common law. Also even when a plaintiff names only a foreign official, it may be the case that the foreign state itself, its political subdivision, or an agency or instrumentality is a required party, because that party has “an interest relating to the subject of the action” and “disposing of the action in the person's absence may ... as a practical matter impair or impede the person's ability to protect the interest.” Fed. Rule Civ. Proc. 19(a)(1)(B). If this is the case, and the entity is immune from suit under the FSIA, the district court may have to dismiss the suit, regardless of whether the official is immune or not under the common law.

Finally, a plaintiff seeking to sue a foreign official will not be able to rely on the Act's service of process and jurisdictional provisions. Thus, a plaintiff will have to establish that the district court has personal jurisdiction over an official without the benefit of the FSIA provision that makes personal jurisdiction over a foreign state automatic when an exception to immunity applies and service of process has been accomplished in accordance with 28 U.S.C. § 1608.

[Samantar v. Yousuf, __ US __, 130 S. Ct. 2278 (2010)]
 

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Carpenter alleged that he was subject to abuse by the courts of Chile in a criminal case that was initiated in Santiago, Chile over ten years ago. He was prosecuted for fraud, but declared not guilty by the Chilean courts. He sued the Republic of Chile and various government officials of Chile, among others, in the Eastern District of New York to remedy these alleged wrongs. The District Court dismissed Carpenter's complaint against the Republic of Chile and the government officials of Chile because it concluded that the Foreign Sovereign Immunities Act (“FSIA”), 28 U .S.C. § 1602 et seq., barred the District Court from exercising jurisdiction over those defendants.

Carpenter made 5 arguments concerning the Republic of Chile:
1) the Torture Victim Protection Act , 28 U.S.C. § 1350 note (a)(1), effectively overrides the jurisdictional bar set forth in FSIA;
2) the Republic of Chile lost its sovereign immunity under FSIA's exception for state-sponsored terrorist acts set forth in 28 U.S.C. § 1605A;
3) the Republic of Chile waived its sovereign immunity by joining various treaties;
4) his claim falls under the commercial activity exception to FSIA set forth in 28 U.S.C. § 1605(a)(2);
5) the international law doctrine of jus cogens provides a further exception to FSIA.

The Second Circuit rejected all of these arguments and concluded that the District Court did not err in dismissing Carpenter's claims against the Republic of Chile.

The District Court had relied on the Second Circuit’s 2008 decision in In re Terrorist Attacks of September 11, 2001, 538 F.3d 71(2d Cir.2008) to conclude that FSIA extended to individual officials of foreign governments acting in their official capacities. The Supreme Court's recent decision in Samantar v. Yousuf, however, abrogated that 2008 precedent insofar as it held that FSIA applied to individual officials. No. 08-1555, 2010 WL 2160785 (S.Ct. June 1, 2010). Although FSIA no longer protects government officials, the Supreme Court expressly noted in Samantar that “[e]ven if a suit is not governed by [FSIA], it may still be barred by foreign sovereign immunity under the common law.” Accordingly, the Second Circuit vacated the judgment of the District Court insofar as it dismissed Carpenter's complaint against the government officials of Chile on the grounds that FSIA provided immunity. It left it to the District Court to determine, in the first instance, whether Carpenter's claims against the government officials of Chile are barred by foreign sovereign immunity under the common law.

[Carpenter v. Republic of Chile , --- F.3d ----, 2010 WL 2558012 (2nd Cir. June 28, 2010)]
 

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General Star National Insurance Company (“General Star ”) sought a writ of execution against the Romanian Bank of Foreign Trade (“RBFT”) on a theory of reverse veil-piercing, which seeks to hold a corporation (RBFT) liable for the actions of its shareholder (the Romanian government).
The district court judge noted that the Supreme Court has held that “government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.” First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 626-27, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983) [hereinafter “Bancec” ]. The Court cautioned that “[f]reely ignoring the separate status of government instrumentalities would result in substantial uncertainty ... [and][a]s a result, the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration would surely be frustrated.” Bancec, 462 U.S. at 626.

In Bancec, the Cuban government established a bank to serve as an official autonomous credit institution for foreign trade. Id. at 613. The Cuban bank sued an American bank, seeking to collect on a letter of credit. Id. The American bank counterclaimed, asserting a right to set off the value of its assets that had been seized and nationalized by the Cuban government within days after the Cuban bank filed suit. Id. The Cuban government subsequently dissolved the Cuban bank, transferred its assets, and substituted itself as plaintiff. Id. at 615-16. The question presented, therefore, was whether the American bank was entitled to the setoff, despite the fact that the Cuban bank was established as a separate juridical entity from the Cuban government.

The Bancec decision “announce[d] no mechanical formula for determining the circumstances under which the normally separate juridical status of a government instrumentality is to be disregarded.” Id. Rather, the decision merely applied “internationally recognized equitable principles to avoid the injustice that would result from permitting a foreign state to reap the benefits of our courts while avoiding the obligations of international law.” Id. at 633-34. This Court is guided, therefore, by the general principle that the presumption of corporate separateness may be overcome where (1) “a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created,” or (2) when recognition of the separate corporate form “would work fraud or injustice.” Id. at 629 (internal quotation marks omitted); Additionally, the Bancec Court provided a definition of a typical independent government instrumentality:

A typical government instrumentality, if one can be said to exist, is created by an enabling statute that prescribes the powers and duties of the instrumentality, and specifies that it is to be managed by a board selected by the government in a manner consistent with the enabling law. The instrumentality is typically established as a separate juridical entity, with the powers to hold and sell property and to sue and be sued. Except for appropriations to provide capital or to cover losses, the instrumentality is primarily responsible for its own finances. The instrumentality is run as a distinct economic enterprise; often it is not subject to the same budgetary and personnel requirements with which government agencies must comply. Bancec, 462 U.S. at 624.

Based on the facts of the case the court denied the General Star's motion for a writ of execution against RBFT.
 

[GENERAL STAR NATIONAL INSURANCE COMPANY, formerly known as the Monarch Insurance Company of Ohio, v. ADMINISTRATIA ASIGURARILOR DE STAT, et. Al. 2010 WL 1948580 (S.D.N.Y. May 12, 2010)]
 

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As reported by  Jess Bravin in the Wall Street Journal On Line, the Supreme Court heard arguments on March 3 over whether foreign leaders are entitled to legal immunity in the U.S. for their official acts, in a case that some justices suggested could hold ramifications for former American officials.The court is seeking to reconcile two U.S. laws in apparent conflict.

The Torture Victim Protection Act of 1991 authorizes lawsuits against people who allegedly committed torture or extrajudicial killing "under actual or apparent authority…of any foreign nation" when the home nation lacks adequate remedies for such offenses. But the 1976 Foreign Sovereign Immunities Act exempts foreign governments and their "agencies" and "instrumentalities" from being sued.

The case involves a former Somali official, Mohamed Ali Samantar. Five Somali natives, including two U.S. citizens, claim that they or their relatives were abused or killed by forces under Mr. Samantar's command. Mr. Samantar, who now lives in Fairfax, Va., contends that because he was prime minister or defense minister from 1980 until the Somali regime's 1991 collapse, he was an "instrumentality" of government and thus immune from liability.

In a ruling last year, the Fourth U.S. Circuit Court of Appeals disagreed. The Richmond, Va., court said the Immunities Act was designed to cover entities such as national airlines and other state-owned businesses, not individuals. Other appeals courts have read the Immunities Act more broadly, and the Supreme Court seemed similarly divided over how to construe the law.

Shay Dvoretzky, a lawyer representing Mr. Samantar, said there was no way to distinguish between a foreign government and the individuals who ran it. Congress immunized "foreign officials for acts taken on the state's behalf, because such suits are the equivalent of a suit against the state directly," he told the court.

Patricia Millett, an attorney representing the plaintiffs, said that if Mr. Samantar was right, then the Torture Victim Act "was a very empty statute."

Deputy Solicitor General Edwin Kneedler said the law's ambiguity was intended to leave discretion with the executive branch, which could advise courts whether specific torture lawsuits should be allowed to proceed. "There are a lot of diplomatic sensitivities about whether immunity should be recognized in a particular case or not," Mr. Kneedler said.

Last year, Baltazar Garzon, a Spanish magistrate, opened an investigation into torture allegations against six former Bush administration officials, including former Justice Department lawyer John Yoo.

A decision in Samantar v. Yousuf is expected before July.

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 CYBERsitter, LLC which does business as Solid Oak Software, has filed suit in the US District Court, Central District of California  against the Chinese government and two Chinese companies (among others) for software piracy in the theft of approximately 3,000 lines of code from Solid Oak’s internet content filtering program. This software called CYBERsitter, was designed to help parents protect their children from viewing inappropriate pornographic and violent content on the Web. CYBERsitter , the first commercially available Internet content filter, has been published for over 14 years and has over 2.4 million active CYBERsitter users worldwide, including 20 thousands of businesses, individuals, and schools in China.

The law suit alleges that Chinese software developers, in collaboration with the Chinese government, purported to design an Internet content filtering program known as Green Dam Youth Escort. Like CYBERsitter, the Green Dam program was allegedly designed to block pornographic and violent Internet content from children. Unlike CYBERsitter, however, the Green Dam program was found to contain filters to block political  and religious content expressing views that differed from those of the Chinese government.

Solid Oak alleges that a group of  independent researchers at the University of Michigan confirmed that the Green Dam developers had  copied verbatim   nearly   3,000   lines  of code  from the CYBERsitter program and incorporated   it   into the Green Dam program.

The stolen materials include the heart of the CYBERsitter software: its proprietary content filters. The Chinese government has issued Green Dam usage figures reporting — as of early June 2009 — that over 153 million computers marketed for home use had been sold with the Green Dam program, that the Green Dam program had been installed on more than half a million computers in Chinese schools and that Green Dam had been downloaded by users from the Internet an additional 3.27 million times.

The plaintiff seeks over $ 2 Billion Dollars in damages under a variety of theories including misappropriation of trade secrets, unfair competition and copyright infringement.

The court case will impose significant challenges for Solid Oak including defenses of personal jurisdiction and sovereign immunity and this litigation will take years to unfold.
Diplomacy has been unable to stop, or even thwart, the wholesale violation of US intellectual property rights in China. It will be interesting to see if civil litigation and the risk enormous money damages will provide the needed threats and sanctions to bring a stop to this piracy.

At the end of the day, i.e. years from now, this case will eventually settle - Just the cost of doing business with the world’s most populous economy.
 

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