ASIL Insights

Germany v. Italy: The International Court of Justice Affirms Principles of State Immunity

The 2011 Update of the OECD Guidelines for Multinational Enterprises

P.R.I.M.E. Finance: The Role and Function of the New Arbitral Institution for the Settlement of Financial Disputes in The Hague

Risky Research and Human Health: The Influenza H5N1 Research Controversy and International Law

The Durban Package and the Goals of Pacific Small Island Developing States

Outside the United States, Extraordinary Rendition on Trial

ILIB

U.S. President Obama Executive Order -- Blocking Property of the Government of Iran and Iranian Financial Institutions (Feb. 6, 2012)

Click here for document (approximately 2 pages)

President Obama has issued an Executive Order blocking additional property belonging to the Iranian government and its financial institutions. According to a White House press release, the President has concluded that Iran's conduct and policies are a threat to U.S. national security, foreign policy, and economy.

According to President Obama, additional sanctions are justified for several reasons, including "the deceptive practices of the Central Bank of Iran and other Iranian banks to conceal transactions of sanctioned parties, the deficiencies in Iran's anti-money laundering regime and the weaknesses in its implementation, and the continuing and unacceptable risk posed to the international financial system by Iran's activities."

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World Court Elects President and Vice President (Feb. 6, 2012)

Click here for press release (approximately 1 page)

According to the International Court of Justice ("ICJ") press release, the ICJ has elected two ASIL members to serve as the Court's President and Vice-President. Judge Peter Tomka (Slovakia) was chosen as the President and Judge Bernardo Sepulveda-Amor (Mexico) as the Vice-President of the Court. They will each serve for a term of three years.

In November and December 2011, the UN General Assembly and the UN Security Council voted to fill five seats that became vacant on February 6, 2012.

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United States and Canada Sign/Renew Agreement on Civil Assistance and Defense (Jan. 25, 2012)

Click here for press release (approximately 1 page) 

According to CBC News, the United States and Canada have recently concluded a new agreement, and renewed an existing agreement, on the coordination of civilian and military forces against common threats. CBC reports that the "civil assistance agreement lets military personnel and equipment deploy rapidly to humanitarian events," while the "defence agreement sets out the authority and means for the two countries to approve homeland military operations against threats, as well as the process for sharing information."

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U.S. Court of Appeals for the Second Circuit

Chevron Litigation: Naranjo et al. v. Mendoza et al. (Jan. 26, 2012)

Click here for document (approximately 30 pages)

The U.S. Court of Appeals for the Second Circuit has ruled that the district court erred in finding that a putative judgment-debtor (Chevron) had a cause of action under the New York Uniform Foreign Country Money-Judgments Recognition Act ("Recognition Act") to challenge a foreign judgment before a party actually sought to enforce that judgment. According to the Court of Appeals, Chevron "can challenge a foreign judgment's validity under the Recognition Act only defensively, in response to an attempted enforcement." Since the Ecuadorian plaintiffs have not attempted to enforce their multi-billion judgment in New York, Chevron could not benefit from a global injunction limiting the enforcement of the award.

This decision is the latest chapter in the ongoing litigation between Chevron and the Ecuadorian plaintiffs, who won an eighteen billion dollar judgment in Ecuadorian courts against Chevron for pollution caused by Texaco (Chevron inherited the case after taking over Texaco) to the Lago Agrio region of the Ecuadorian Amazon. Texaco had settled the case before Chevron took over, but the plaintiffs commenced a new suit in Ecuador and New York. In anticipation that plaintiffs will enforce their award in the United States, Chevron brought the present action in New York, seeking a global anti-enforcement injunction against the plaintiffs in order to prevent them from enforcing the "allegedly fraudulent" judgment, recently affirmed by courts in Ecuador.

Chevron successfully argued before the New York district court that the Ecuadorian award was "fundamentally tainted by fraud." "Specifically, the court concluded that Chevron was likely to show that the Ecuadorian court system is incapable of producing a judgment that New York courts can respect, under the Recognition Act, as 'the Ecuadorian judicial system no longer acts impartially, with integrity and firmness in applying the law and administering justice.'" The district court also found that there was "'ample evidence of fraud in the Ecuadorian proceedings,'" and "that such evidence was sufficiently serious to warrant a preliminary injunction."

The Ecuadorian plaintiffs appealed. The Court of Appeals ruled in favor of the plaintiffs, concluding that "[w]hatever the merits of Chevron's complaints about the Ecuadorian courts, . . . the procedural device it has chosen to present those claims is simply unavailable: The Recognition Act nowhere authorizes a court to declare a foreign judgment unenforceable on the preemptive suit of a putative judgment-debtor." 

Chevron has also appealed Ecuador's lower court decision in Ecuador, arguing that the lower court's decision violated Ecuador's Constitution. In addition to the Ecuadorian and U.S. proceedings, Chevron has commenced arbitral proceedings in The Hague under the US-Ecuador Bilateral Investment Treaty. In February 2011, the arbitration tribunal ordered that Ecuador suspend enforcement of the lower court's judgment against Chevron until further notice.

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U.S. Court of Appeals for the District of Columbia Circuit

Republic of Argentina v. BG Group PLC (Jan. 17, 2012)

Click here for document (approximately 17 pages)

The U.S. Court of Appeals for the District of Columbia has vacated an arbitral award against Argentina on the basis that the investor commenced an international arbitration against Argentina without first filing a claim in the Argentine domestic courts, as required by Article 8(2) of the U.K.-Argentina Bilateral Investment Treaty ("BIT"). The Court concluded that "the arbitral panel rendered a decision wholly based on outside legal sources and without regard to the contracting parties' agreement establishing a precondition to arbitration."

The original dispute is between a British investor, who invested in a gas transportation and distribution company incorporated in Argentina, and Argentina. In 2003, the investor filed an arbitration against Argentina claiming that government measures taken in response to the 2001-2002 economic crisis in Argentina amounted to expropriation of the investor's investment and violated the fair and equitable treatment standard of the BIT.

During the arbitration, which took place in Washington, D.C., the investor argued--relying on an article by the former Argentine Attorney General and Minister of Justice, who had estimated that it would take six years to resolve the investor's claim in Argentina--that it would have been "senseless" to commence domestic proceedings in Argentina as required by Article 8(2) of the BIT. The investor also argued that "customary international law did not require exhaustion of local remedies, and that Article 3 of the Treaty, the Most Favored Nation Clause, obviated the requirement that it seek recourse in Argentine courts given that Argentina's investment treaty with the United States lacked such a requirement."

The arbitral tribunal rejected the investor's first argument, but nonetheless concluded, referring to Article 32 of the Vienna Convention on the Law of Treaties, that Argentina's emergency decrees had restricted access to its courts and had excluded from the renegotiation process investors like the claimant, and thus "a literal reading of the Treaty would produce an 'absurd and unreasonable result.'" On the merits, the arbitral panel found that Argentina had violated Article 2 of the BIT by failing to provide fair and equitable treatment to the investor's investment. The panel rejected Argentina's state-of-necessity defense under customary international law, concluding that the defense was "limited to exceptional circumstances, such as where there is a 'serious and imminent threat and no means to avoid it.'" The panel awarded the investor US $185,285,485.85, plus interest, costs, and attorneys' fees.

After the award was issued, Argentina petitioned to vacate or modify it under the U.S. Federal Arbitration Act. The investor filed an opposition and a cross-motion for recognition and enforcement of the award. The district court agreed with the investor, denying Argentina's petition to vacate and granting enforcement of the award. Argentina appealed.

The Court of Appeals first focused on the relevant provision of the BIT, which requires the parties, prior to initiating an international arbitration, to attempt to solve the dispute through diplomatic channels and then in the domestic courts of the party wherein the investment is located. Under the BIT, if the domestic courts fail to issue a final judgment within eighteen months, then the investor can commence an international arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL Rules") to resolve the dispute. Thus, the Court had to determine 1) whether the temporal requirement was intended as a precondition to arbitration by the contracting parties, and 2) if so, if the precondition was not satisfied, whether the arbitrability question is determined by the courts or by the arbitral tribunal.

With respect to the first question, the Court of Appeals, relying on U.S. Supreme Court precedent, concluded that the intent of the contracting parties (Argentina and the United Kingdom)--in this case requiring the exhaustion of domestic remedies--was determinative. Thus, the investor should have exhausted domestic remedies prior to commencing the international arbitration. With respect to the second question, the Court of Appeals ruled that because the BIT "is silent on who decides arbitrability when that precondition [on exhaustion of domestic remedies] is disregarded, . . . the question of arbitrability is an independent question of law for the court to decide." The Court concluded that the district court "erred as a matter of law by failing to determine whether there was clear and unmistakable evidence that the contracting parties intended the arbitrator to decide arbitrability where . . . [the investor] disregarded the requirements of Article 8(1) and (2) of the Treaty to initially seek resolution of its dispute" in Argentine courts.

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U.S. Court of Appeals for the Second Circuit

Figueiredo Ferraz E Engenharia De Projeto LTDA. v. Republic of Peru (Dec. 14, 2011)

Click here for document (approximately 48 pages)

Reversing the district court, the U.S. Court of Appeals for the Second Circuit has held that forum non conveniens--a common law legal doctrine allowing courts to refuse jurisdiction over disputes where a more appropriate forum is available to the parties--barred federal courts from exercising jurisdiction over this enforcement action. The Court found that the Republic of Peru was an adequate alternative forum because a domestic statute determining the amount of compensation available to satisfy the award was "'intimately involved with sovereign prerogative,'" and "Peruvian courts are 'the only tribunals empowered to speak authoritatively' on the meaning and operation of the cap statute."

A Brazilian company ("Figueiredo") sought the enforcement of a Peruvian arbitration award in the amount of US $21,607,003 for the company's engineering studies on water and sewage services in Peru to which the parties agreed in 1997. In 2005, after a fee dispute arose between Figueiredo and the Peruvian government, Figueiredo commenced arbitration proceedings in Peru under the parties' 1997 agreement. An arbitral tribunal rendered an award ordering the Peruvian government to pay Figueiredo more than US $21 million, which included approximately US $5 million of principal damages plus accrued interest and costs. Because of a domestic law limiting the amount the Peruvian government can pay per year to satisfy a judgment against it (3% of the budget of a governmental entity in question), Figueiredo has not sought execution of the award in Peru and has so far only collected US $1.4 million of the award, which Peru has voluntarily paid.

In January 2008, Figueiredo filed a petition in the Southern District of New York to confirm the arbitral award and obtain a judgment for US $21,607,003. The district court rejected Peru's motion to dismiss and approved the award. Peru appealed.

The Court of Appeals first noted that the district court erred in not considering one of Peru's main arguments--i.e., that Figueiredo's claim should be dismissed because of the forum non conveniens doctrine. Finding that the forum non conveniens standards "concern both private and public interests," the Court went on to rule that the statutory cap for awards in Peru was "a highly significant public factor warranting FNS [forum non conveniens] dismissal." According to the Court, "there is . . . a public interest in assuring respect for a sovereign nation's attempt to limit the rate at which its funds are spent to satisfy judgments." Thus, just because Figueiredo "might recover less in an alternate forum does not render that forum inadequate."

Circuit Judge Gerard E. Lynch strongly dissented. He first noted that Figueiredo is only seeking to enforce an award already obtained in an international arbitration, not adjudicating the dispute on the merits. Judge Lynch concluded that "[b]y using the mechanism of forum non conveniens to import a substantive and selfserving provision of Peruvian law into what should properly be a summary proceeding, the majority significantly undermines the background expectations against which the parties made their contract." In fact, according to Judge Lynch, the United States, a party to the Inter-American Convention on International Commercial Arbitration ("Panama Convention"), has "committed itself to open our courts to the enforcement of international arbitral awards as if they were foreign judicial judgments. This commitment requires us to recognize and enforce international arbitral awards in the vast majority of cases."

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National Defense Authorization Act for Fiscal Year 2012 and President's Accompanying Statement (Dec. 31, 2011)

Click here for document (approximately 689 pages); click here for statement (approximately 2 pages)

On December 31, 2011, President Obama signed into law the controversial National Defense Authorization Act ("NDAA") for Fiscal Year 2012. The Act provides, inter alia, funding for the defense of the United States and its interests abroad.

Two provisions in the Act have been the source of much criticism and controversy-- namely Sections 1021 and 1022, which deal with the authority to detain individuals supporting terrorism. Section 1021 reaffirms the authority of the U.S. military to detain "covered" individuals pursuant to the Authorization for Use of Military Force. Many have read this provision to mean that U.S. nationals can now be lawfully detained without trial, even though the following caveat is included to address this concern: "Nothing in this section shall be construed to affect existing law or authorities, relating to the detention of United States citizens, lawful resident aliens of the United States or any other persons who are captured or arrested in the United States." However, many have expressed their misgivings about this provision, especially since the status of the "existing law or authorities" regarding the detention of U.S. citizens appears uncertain. 

President Obama expressed his administration's reservations in a signing statement issued upon his signing the statute into law. He specifically noted that he has "serious reservations with certain provisions that regulate the detention, interrogation, and prosecution of suspected terrorists." According to President Obama, his "Administration will not authorize the indefinite military detention without trial of American citizens," and his administration "will interpret section 1021 in a manner that ensures that any detention it authorizes complies with the Constitution, the laws of war, and all other applicable law."

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U.S. National Action Plan on Women, Peace, and Security (Dec. 2011)

Click here for document (approximately 26 pages)

The White House released its first National Action Plan on Women, Peace, and Security meant "to empower half the world's population as equal partners in preventing conflict and building peace in countries threatened and affected by war, violence, and insecurity."

The Action Plan is the result of more than a decade of work that commenced with the adoption of United Nations Security Council Resolution 1325, which urged the UN and its Member States to ensure increased representation of women in all aspects of peace and security. 

On December 19, 2011, President Obama signed an Executive Order instituting a National Action Plan on Women, Peace, and Security and providing the concrete steps the U.S. government should take "to accelerate, institutionalize, and better coordinate our efforts to advance women's inclusion in peace negotiations, peacebuilding activities, and conflict prevention; to protect women from sexual and gender-based violence; and to ensure equal access to relief and recovery assistance, in areas of conflict and insecurity."