Dispute resolution8/9/11 3:45 PMSomething like a 3 hour exam. 3 part structure2 Essay questions2 regular issue spotter type questions3 section will either be a policy question, or a short answer section. There will be a practice exam. Limited open book exam. Book, supplements from online. (should have them. CISG, FCPA, COGSA, UCP 600, Outline prepared solely by yourself. 11/22/113 questions. One more policy based.2 essay questions. About a 3 hour exam. Limited open bookCan have casebook Anything posted on TWENCan have an outline that you yourself prepared. Primary Documents that you should haveCOGSACISGFCPAUCP 600(also responsible for anything in the Casebook.)ReviewCourse OrganizationIncreasing market penetrationBasic Tradeoff in getting into foreign marketMore present you are in foreign market, the more liable you are in that state and the more exposed you are to its laws and regulatory ability. Tradeoff between control, and Sales of goods transactionMechanics of sale and deliverySales K Responsibility of Carrier. IncotermsCant just incorporate incoterms, but have to actually pick one. When and where do risks of loss pass etc. Document of title, what makes it and when do we get it. Liability for CarriersCOGSAUS Statute that harmonizes the Hague rules. Be conversant in the policy issues of Hague and Hague-Visby etc. In an effort to update harmonized rules established by Hague era, we may have created more discord. Bills of LadingStraight v. NegotiableSale of GoodsCISGInternational analog to the UCCIf we talked about it you are responsible for knowing it. Installment K. are exception, (dont have to know them.)Know scope of CISG, exclusions. Validity/ tort law etc. Interpretation. Role that customer usage can play in interpretation. Art. 9Customs are usages between the parties. Customs are usages for trade. Art 8Intent is made by understanding a reasonable person would have had. Formation of K under CISGHow mailbox rule works etc.Differences between CISG and the UCC. It would be fair game to ask compare and contrast outcome between CISG and UCCMailbox rule, battle of forms, qualified mirror image rule. Buyers and Sellers obligations.Remedies. BreachArt 25 gives the definition of a fundamental breach. Rights of buyer and seller in event of breach are essentially the same. Damages governed by 74, 75, and 76. If you are the agreived party you an elect dmgs at agreed price, or market price. No parole evidence rule. Can preserve statute of limitations. Letter of Credit and Financing. Control the risk of these types of actions is with letter of credit Bank undertakes to pay seller, against conforming documentsStrict conformity. IndependenceFraud exception is indicated. Be familiar with vocabulary, Issuing bank etc. Back to back creditA creative financing strategy. Keeps buyer in dark by you being named beneficiary and assigning the bank a security interest as well. To get paid you have to have document that conform to the actual documents.Need to know about standby letters of credit Really bad idea, generally only seen where there is extraordinary bargaining power. All you need to trigger standby letter of credit is the declaration that there has been a breach. Know textually where they come from in UCP 600. UCP 600 doesnt cover fraud. Art 16(g) Standards for evaluating DocumentsCant get help with your homeworkHow to identify a discrepancy you can waive it. Art 14 have to make decisions from article alone. Bank has 5 days even I period for presenting documents on date, runs out on day 3Presentation can be satisfied by more than just issuing bank,FDIInternational investment law Creation of dispute resolution bodies has been keyNeed to have jdx under ICSID conventionArt 25 of convention. FCPACorp Social Responsibility. Substantive rulesMost favored Nation Creeping expropriationsInternational Dispute ResolutionChoice of law questions will usually be CISG or something else we have talked. AboutIf it isnt in one of those texts we have discussed, then just say CISG or whateve doesnt apply so you would employ a choice of law between states x and Y

Exam8/9/11 3:45 PM

Professor Meyer tlmeyer@uga.edu542-5433 Office hours Mon 2-3 or by appointment8/17/11Basics of the courseHow you take a simple transaction and complicate itHow do businesses lobby for regimes. IntroductionInternational Business Transaction (IBT)Three typesTransaction between parties of two different countries.Transaction that involves moving goods between countries (even if in same countries)Transaction between parties ho have effects in a different country. 4 mechanisms of exchange. Trading goods. Trade in services. Technology transferThink IP etc.Trade in Capital. Basically foreign direct investmentThere has been a large surge in globalization in the form that there has been an increase in the 4 IBT mechanisms of exchange.Partially this is due to the birth of international trade law. Post WWII sense that problems of WWII started in part because everyone was trying to shore up their economies against everyone else which lead to a race to the bottom. Brenton Woods conferece, which gave us the international monetary fund, the world bank, General Agreement on Trade and Terrorists (GATT)There was a proposal to include the ITO, but the US rejected it and without the US there was no ITO.Eventually got it all with the WTOUS and Britain made it together and it incorporated the GAT and the ITOEnd of the cold war lead to the opening of markets. Russia, China, India etc. Rise of the multinational enterprise. As a Co. not as prevalent in early 20th century. Used to be Choice of law was the biggest issue. Now not as much because there has been move to harmonize at the international level. Consequently also tend to see the death of mandatory choice of law rules. (instead see a lot of freedom of K issues)Start to see Lex Mercatoria(Look this up)Methods of HarmonizationVariety of methods govs can useMultilateral Bilateral treatiesSupernational legislationModel Laws (just hoping local juris will adopt. )Model KRestatements of the law by experts. 8/19/11Understanding how transactions work.Globalization complicates the basic local transactions with a great deal more issue. The reputational mechanisms that work in the community or local business become much weaker. Information about your counter party is going to be harder to come by. There are also third party risks that can come in to the mix. Banks, and shippers are the two big third parties that we will discuss. Whole bunch of risks can come into play, risks that are controllable and not.Also need to worry about money flows, when are they going and when are they coming . When do you need to manufacture by etc. Risks from capital flows and risks from delivery. Going to talk about how we assign them contractually, etc. Goal of legal regimes is to deal with these risks. Could be statutes or treaties. (Public Law solution)Have to worry if a treaty is a self executing treaty (meaning it doesnt require execution by government)Also could be contractual models. Terms and drafting principles that are defined and understandable such that everyone understands the obligations etc. Anatomy of an international sales transaction3 Contracts at issue. Sales ContractLetter of CreditBill of Lading and K of Affreightment. Here Purchase order would be the OfferAknowledgment is the acceptance. Seller wants the aknowedgment so that it can control the creation of the K, otherwise the invoice and purchase order might make a K. From a K perspective, purpose of the first 2 documents. Are part of the K because they are incorporated by reference. Additionally, because people tend to do business this way we incorporate the discussion of the terms previously. Outside the US they are more open to looking outside of offer and acceptance in defining the K. (for example outside there is no parole evidence rule.)Essential TermsPrice, Goods, Description etc. Commercial TermsFOB: Free on Board: buyer become responsible at the sellers port. CFR: Cost plus Freight: Seller is responsible for the cost of shipping.CIF: Cost of Goods Insurance and Frieght: meaning insurance and shipping is included. Buyer wants multiple shipping options because seller has access to more accounts. Etc. Often lawyers are going to play two rolesMonitoring role: this may be difficult since they may not have any way of knowing if things have gone ary. Lawyers are more expensive than K specialists, so you want lawyers to come in at the right moment but it can be difficult to ensure that the Lawyer comes in at the right moment. Sometimes you want attorneys to come in and review the K prior to it be set up. Even that may not guarantee that we will be able to control the transactions in the way that we would like to. This is a method of internally managing risks that are inherent to engaging in these types of transactions. Letter of Credit: a K of payment from a bank to a seller. Purpose is to assure the seller of payment. Establishes an independent obligation of payment. Can be complicated. Sellers want these because it minimizes the risk of not being paid. Also it shifts responsibility of investigating credit worthiness of the buyer to the bank. Bank may have branch in other country, or may have better ability and definitely expertise in determining credit worthiness. Confirming bank is undertaking to check on the seller, issuing bank is going to pay the confirming bank as long as they have the agreed upon documents. Buyer to Issuing Bank to Confirming Bank to seller (sometimes without confirming bank but probably not generally) Commitment to pay.Commitment to produce (both product and appropriate documents) goes from Seller to Confirming bank, to issuing bank to Buyer. There are transactional costs involved here so if there is a strong relationship with the risk of default being low you might do without this. Strict compliance principleDocuments have to strictly comply with what the letter of credit indicates. Independence principleObligations underlying the payment is separate from the sales contract.Bank is good at confirming documents not the quality of widgets etc. UCP: set of standardized terms that are included in form of Letter of Credit. Method of K harmonization. One other risk related to payment is a currency risk. Currencies are fluctuating so there is real risk depending on how you think the exchange rate is going to change. K of Affreightment and Bill of LadingOften Sellers are going to work with a fright forwarder to get the goods t the port. When they get loaded onto a ship we have a bill of lading. Which assures transportation of goods to a certain place for a fee as well as telling the carrier who to deliver the goods to. Two types of bills of ladingNegotiable, deliverable only to who has the sales K, name on the line. Has to have copy of the bill of lading.Non-negotiable, will say more or less specifically who to transport to, and them or their agent can get the goods. Bank will likely require a bill of lading so that the bank can get access to the goods if they need to. Likely to only contain a general description of the goods. Bill o Lading will K control the shippers liability, and the carriers liability. Carrier of goods by sea act, default rule is $500 per package. 8/22/11A large portion of this excersize is how we think about risks of the transactions. Sales Contract: sets up obligation between buyer and seller. Letter of Credit: an Obligation from Bank to seller obligating them pay seller upon the receipt of specific documents. Bill of Lading/contract of Afreigtment: Serves 2 purposesK between the seller and the Carrier describing exactly what they are going to do, tells the carrier who to deliver the goods to .In a negotiable bill of lading, no specific individual which means the Bill of Lading can be transferred during transit, it becomes a document of title. If the goods are non-conforming, your remedy is to sue the seller under the sales K. Review of KFirst thing we start with is a choice of law problem. Which body of public law applies to a K. Remember to separate the default rules from the mandatory rules .Mandatory rules cannot be contracted around. Most countries dont have mandatory rules that dictate what would otherwise make more sense for the parties to determine between themselves. Might have incoterms with modificationsMight determine rules by reference to Incoterms etc. Commercial Terms and IncotermsNeed to deal with delivery problem, how do we deal with the fact that payment, delivery, and location are separated by time and space. More efficient to have these norms because that way you dont have to negotiate and figure it out fresh each time. Incoterms are part of the sales K, Risk of loss passes at the time of delivery, whenever that is. Incoterms tell us when the seller has satisfied that obligation and what the seller has to do to satisfy that obligation. With reference to sea passage that means at the ships rail. Not done by treaty, in part to leave options open, allow people to K around with it. Delivery obligation itself is one of the things that varies. There are 4 families E, F, C, and D. E buyer has to come pick it upF delivery is made by carrier determined by the Buyer. C delivery passes on delivery to the carrier. Costs paid by seller (only dfference between F and C.)D seller transports to a location, and also bears risk until buyer takes possession. 8/24/11Terms are used in the Sales K. 4 families of terms that reflect a different continuum in which liability is satisfied Risk of loss passes form sell to buyer when the seller satisfies its shipping obligation. In general will be in terms of when the goods pass the rail FOB transaction buyer is responsible. C transaction Seller is responsible. Incoterms, are off the shelf private rules that are incorporated by K. They can replace the default terms. Or you can include them and then Contract around them. CasesThese cases predate the incoterms but remember the incoterms are based on old trends. Biddell Brothers v. E. Clemens Horst CompanyBuyer is able to make the choice of whether or not to make inspection against payment. If the goods had been lost at sea, inspection would have been made impossible and as such the buyer would have been responsible against the documents. Lord Farwell, considers that the risk of loss passes upon passing the rail. Buyer is on the hook to pay against documents, in the event of a loss but is allowed to inspect if there is no loss. Lord Kennedy, believes that the payment should be made against the documents. In CIF seller has agreed to pay freight and insurance. If buyer doesnt have to pay against Documents then the seller is paying everything, has to receive the goods on the other end and pay the costs of all of that. House of Lords says that Kennedy got it right and the others got it wrong. And it is clear and short. Delivery is satisfied when the goods pass the ships rail and documents are delivered. Had this been a non-negotionable the P would have had the rights to inspect the goods prior to payment. Once the carrier issues to the seller the non-negotionable bill of lading confers no additional rights on the buyer. How do Incoterms inply a liability to pay against the documents. In A8 it discusses that it allows the buyer to sell the goods while they are in transit. Can vary the incoterms by K. Documents of TitleThe Julia (What constitutes a Document of title?)Transfer of Rye around WWII going to Antwerp. Ship has to divert to Lisbon, sells the goods at a loss, and now someone has to bear the loss. Seller and Buyer each have agents and then the seller has a cargo receiver in Antwerp.Buyers agent has a delivery order that is to be presented to receive the portion of the grain that was purchased. But that delivery order has to be signed by the captain in order to receive it. Must be the equivalent of goods in the sense that the document confers on the holder the rights to the goods valid against all the world.Cannot be at the discretion of someone else as to whether or not to release the goods. Buyer had actually paid here, so the default was on the sellers part, buyer had not paid for a document of title but for specific payment of the goods. This case lacks a clear indication that the parties intended it to be a CIF transaction. If you want to K for a payment against documents you need to specifically K for it. Even if you call it a CIF transaction if you set it up for payment over a document that is not a document of title then you are not making a CIF but rather a modified CIF that doesnt work for payment against documents. Specific takes presidence over the general. Shipping and Delivery Commercial Terms. K of AffreightmentTypically K between seller and carrier. (could be between buyer and carrier but generally seller and carrier)CIF is most common form. 4 modes of transportAir, Sea, Train and Road. Also Multimodal which uses 2 or more. Most are by sea. And this is where the majority of the issues arise. Common carrier holds themselves out to the public. At common law the carrier was an insurer who was liable for the loss. Started putting in limitations on liability. Haugue RulesNew rules were established by statute because carriers had too much bargaining power. Charter partyPrivate carrier. Only liable for breaches of the K. Hauge-Visby Rules (COGSA used in the US) There have been some attempts to update but most havent ratified them yet. 8/26/11International sale of goods, basic problem is the problem of managing risk. Choice of law problem and problems of time and spaceSale of goods has 3 partsLetter of creditSale of goodsShipment (started here)Shipping termsContracts of afreightment are K between seller and shipperIncoterms actually go in the sales K not in the K of afreightment. Biddell BrothersCIF transaction implies payment against documents.JuliaDefining characteristic of document of title is it transfers rights for property against all other people in the world. Just calling something a CIF transaction doesnt make it CIF without documents of title. CIF transaction implies payment against documentsK of AFreightment You have the history of the development of the rules. Haugue rules come about and then Visby. US is 100% Hague. Eli LillyFacts: Brazilian company was using Fedex to get goods to Japan. (K with Nippon do Brazil, who subcontracted with Fedex.)Issue: Whether Brazilian Law or American law applies in terms of the liability. (Brazilian law would not enforce the $20 per Kilo, American Law would)Difference of about a 3 quarters of a million dollars. It is a question of choice of law.Ruling: American Law appliesReason: There is a strong desire to enforce the bargain that the parties struck. Lilly filed it in New York at which point it invited the presumption that American law governs. Restatement (2nd) of Conflicts of Laws 197 (emphasis added)Establishes a brightline rule that would generally make it a Brazilian law issue.Even though Brazil has a large interest we need to apply the law as the parties would have expected. Might look like the judge is saying I already know American Law and dont want to go look. Really you tend to see statements likeyou invited application of our law by filing here. If it really was a clear as presumed then if they wanted Brazilian law they would have filed in Brazil. Choice of law can be difficult and a lot of money can move and shift based on this. Norfolk Southern Railway Co. v Kirby. Facts: Kirby is in austraila who is shipping to Huntsville Alabama, they contracted with ICC, who ended up subcontracting with Hamburg Zud who then subcontracted with Norolk Southern Railway. Norfolk has a train wreck on the back end of this transaction Parties of interest: Kirby has already been paid off by the insurance, the insurance company is seeking damages against the payoff they have already made.District court granted in favor of Norfolk, 11th circuit reversed so the supreme court takes it to look at it now.Issue: Whether the liability limitation in the ICC BoL extends all he way down to Norfolk.Court rules 11th circuit wrong based on the plain language of the Himilaya Clause that indicates an intent to extend liability limitation broadly to any servant, agent or other person.Issue 2: Whether that liability limitation, which ICC negotiated, prevents Kirby from suing Norfolk. 3 Clauses Himalaya Clause: is a clause that applies to all subsequent contractors. Responsibility Clause: What/Where the parties are responsible. (meaning what modes of transportation are covered in multimodal transportation [lets COGSA apply even beyond the ocean.])Clause Paramount: What law is to be applied. Choice of law provision. 8/31/11Fruit of the loom and Steel CoilsNice cases because a lot of what a lawyer actually ends up doing is reading the K rather than the case. Words in K are drafted with more care and the way they are put together is very different then how you go about reading a statute or a case. COGSAWho is a carrier?Have to be owner or charterer of the ship who enters into the K for carriage.In steel coils this was key since bay ocean wasnt a carrier. Could have included a himilaya clause to cover them. COGSA applies from tackle to tackleTime goods were loaded until time they get off the ship. Applies to common carriage and charter parties where a bill of lading was issued. See section 5Section 7 authrosies parties to apply outside of ordinary circumstances.Not 100% sure if it applies over a federal statute that applies. Majority of jurisdictions state that you can opt in to COGSA and overcome the federal law. Basic Structure of the Statute. By agreement you can increase the $500 agreement.Section 12Applies to or from shipments from US to other stateBy K can include shipments from US to US ports. If the K is created in the US you are required to include COGSA to deal with choice of law issue that might arise. Burden shiftingSection 3.4, and 4 puts the burden for claiming exception in on carrier. Establishing Prima facia case is on shipper.Carrier must show due diligence or an exceptionShipper then gets a chance to say contributorily negligent. Carrier can defend this at the last time. Vimar Seguros y ReasegurosCarnival Cruise pointStaute pointLiability doesnt refer to the procedures for enforcing.2nd argument Choice of Law Insurance (Marine Insurance)Already been a conflict, Insurance company pays and then files suit after being subrogated into their clients claims. Usually is a contract dispute as to whether or not the claim is covered by their insurance. Insurance spreads risk which is why it spreads as an industry. For Friday, suing Labor clause. Then the next portion. 9/2/11Finished talking about Shipping delivery issues.Between the buyer and the seller, these provisions will be part of the sales K. Incoterms are a codification of the customary practices of historical options that can apply and can be incorporated by reference in the K. CIF is the most common but there are the 4 families discussed, differering in when the risk of loss passes. Carriers liability and K of affreightmentUsually in the form of Bill of LadingK for carriage of goodsCan serve as a document of title,Also work as receipts/records. Rules that can apply, HagueUS is strict Hague state, Carriage of Goods by sea act(COGSA) is strict enactment of Hague.Hague-VisbyIn the futureHamburg rulesRottam rules. In what ways can you alter COGSA, you can increase the liability, but cant really decrease it lower than COGSA. Policy issues, Carnival cruise etc, which deals with how should we allocate the costs of disputing. Insurance issues.Case we read finds that there was an exceptionLoss of Market exception doesnt apply, Embargo exception applies but there is a question as to how much was embargoed. Sue and labor clause, imposes an obligation on the policy holder to mitigate damages, which they claim didnt apply.

International Business Class Notes8/9/11 3:23 PM

9/2/11We begin with choice of law uncertainty. Kristinus v. H Stern Com. E. Ind. S.A.Facts: man buys 3 jewels based on flyer under his door that says if he doesnt want them he can return them to a store in NY. Idea that you dont neccissarily know what law is going to apply makes it very difficult to anticipate. Choice of law issues are determined on an issue by issue basis which is unfortunate. Choice of law is determined by application of state principles in a non-universal way to issues of national interest. Uniquely a US issue. If you were advising stern here how would you have gone about managing the risk. A forum selection clause might have been the best choice. Also could invoke the UCC imperial clause. (pg 177)CISGCISG is designed to iron out the differences in substantive law, rather than trying to harmonize choice of law. Goal is to promote uniformity in treatment of K. It is a self executing treaty, meaning there is no necessary legislative enactment it just substitutes for domestic law. There are things it doesnt cover, specifically it only covers the business transactions for sale of goods. Unidroit terms can be incorporated similar to incoterms, generally used as gap fillers.Case examples can be found in UNILEX and CLOUTBasically a set of default rules. When does CISG applyTest of nationality is set forth in article 1. Note: wherever it is referenced read the provisions. Article 1 is a diversity test. 9/7/11WE need a treaty (CISG) because it achieves the maximum reduction of choice of law uncertainty. First harmonizes as a default rule and only then allow the parties to modify the default rulesCISG applies to international K for the sale of goods3 reqainternationalFor the SALEOf GOODsInternational= CISG diversity requirementHave to be in different statesThat are both signatories of CISGIf 1 part is signatory and the other is not we apply choice of law rules, apply the domestic law of the choice of state, if you select a CISG signatory you apply CISG, but states can declare exception to 1(1)(b) such as the US has done. If you are in the courts of a country that has signed CISG but has art 95 reservation it is as though 1(1)(b)To determine place of business, look first to primary place that business is conducted and then afterwards look at residence.Disregard the fact that they have different places of business, disregard CISG unless the parties know that they are in a state that CISG applies. Nationality isnt taken into account, just where business is located at. Prime Start Case, Tells you the nationality, strictly speaking that isnt what we are interested in so we assume there that those represent where they are incorporated and that its where their place of business exists. Problem 3-2 (pg 186)If Brazil, Brazilian law would applieIf German law, then probably CISGIf American probably, UCCAmco UKrserviceDistributor agreements do not fall under CISG, they are setting up the relationship. If you allowed it to apply it would allow Amco to reap the benefits of the relationship without the benefit of specific knowledge of what you were selling. Wouldnt want them thinking the agreement was good under CISG but then violate it under art 14.CISG does not apply to framework agreements, or distributor agreements. What else does it mean to be sale of goods?Article 2 indicates other objects that dont qualify as sale of goods. Art 3 ensures that manufacturing goods dont applyArt 4, validity of 3rd party K and property interest governed by domestic law. Art 5, Tort issues dont applyArt 6, parties can modify these rules. 9/9/11Internationality question works like a choose your own adventure. See handout that we were given. (incorporate into outline.)When do we apply CISGInterpretation of CISGExclusions and Gaps are treated differentlyExclusions we look to the laws of a specific country. Gaps we look to CISG itself and the general rules found within CISG. CISG has no parole evidence rulesNo statute of frauds. Gov. can make declaration to reserve statute of frauds. Consideration requirement doesnt have the same bite here as it does in standard U.S. K. Problem 3-5 (pg 195)(Make sure to always go through the steps.)Does CISG apply? YesIs there a SoF problem?No, unless Mexico invokes an article 96 preservation of their writing requirement. GPL case There was basically malpractice, (borderline) because SoF shouldnt have applied, it should have been CISG. And they are trying to have it apply for the appealUnder Art. 6 it can be waived and considered deregated due to their actions. Even though it is choice of law, still really important . Under art. 1 parties must know they are internationial, but doesnt require they know the consequences of that. Att. Job to know how to apply it and when UCC should be applied and when CISG would be better.Offer and AcceptanceBasic rule as to what constitutes offer and acceptance is under art 14. Has to be sufficiently definite and indicates parties intent to be bound. Pratt Whitney caseSells engines, practice of industry is buyer doesnt select the engine until they know the aircraft.There is a lot of back and fort correspondence, Court buys Hungarian airlines arg that you couldnt look at the agreement and know what specifically had been agreed to, not sufficiently definite under art 14. Commercially this doesnt make since because they would have to be producing two different sets of engines, etc. 2 ways to interpret Pratt Whitney opinion. One way to read this is that art 14 doesnt allow for open ended KOther way to look at it is that the documents werent intended to be an offer until the airline had choosen the airplane. The second is probably the better way of interpreting the case.Offer can be withdrawn before the offeree receives it regardless of if the offer is irrevocable. Once it is an effective offer and reaches the offeree now it matters whether it is revocable or not. 9/12/11Art 16(1) of CISG is essentially the mailbox rule: Power to revoke an offer is cut off once you dispatch an acceptance (only applies to revocable offers, and a few other exceptions)Acceptances are effective when received by offeror (art 18)With exception in 18(3)Things are effective when you receive them, with caveats (1) if you can accept by performance. (2) with revocable offers the power to revoke is effected by acceptance. (3) mailbox rule doesnt work where irrevocable offer exists. Remember that mailbox rule cuts off ability to revoke, so an irrevocable offer cannot be revoked. Art 16(1) is where the mailbox rule is, (not called mailbox rule.)Art 14 what is te offer15-17 deal with withdrawl and revocation18-19 deal with acceptance. 18 says what is assent, silence no good enough, statements and conduct are more important. 19(1) is the mirror image rule, that tells us if it differs then it is a counter offer, requiring acceptance. 19(2) is a qualifying part, that incorporates a last clear chance mentality of thinking. Only non-material changes qualify here. 19(3) gives a non-exhaustive list of what is material and what is not. Filanto Case9/14/11Filanto Case.Burden shifted to Filanto because they should have known. One of the questions is whether or not 4 months is abnormally long to expect a response. Problem 3-9Under CISG art 19-3 we know that it is a material change, so it would be a rejection and a counter offer. Sellers term is going to prevail under CISG. Additional TermsK exists under the agreed upon terms, the additional terms become part of the K unless they materially alter the K, or are abjected to.Art 19(2) looks like the UCCDont want to overstate the differences, but in general you are going to find that K are formed under more instances under the UCC. There is a presumption in favor of finding a K under non-mirror image approaches. CISG is more formal than the UCC in regards to its mirror image rule. Less formal no parole evidence rule, no statute of frauds, no consideration is neccissary.If you do get into a dispute resolving it is going to be a lot more expensive because of some of the informal items. It reduces the transaction costs of creating a K because, no need of writing etc.Probably better to save up front, because ideally the majority of your K wont have issues. Additionally the appearance of issues will cause people to behave in certain ways. Also there is less transaction cost if actors are sophisticated, because people will have more of an idea what the rule is which is more of the cost, rather than the costs of meeting the rules. Qualified mirror image rule is the most formal qualifying aspect. All relates to the fact that we are trying to give affect to the parties intent. Performance. CISG has 3 parts, Scope (choice of law), Formation (offers and acceptances are effective when received except mailbox rule, that applies to revocable offers, and consent through conduct. [no consideration necessary for irrevocable offers])9/16/11No Class Wednesday the 21, or Friday 23CISGSection 1 is about choice of law rules. Look at choice of lawApplies to international sale of goods, Look at art 1 and ten to see what applieseArt 2-5 has explicit and implied exclusions. If dealing with an exclusion look to a countries substantial law. Gaps are different we try and fill the gap using art 7-13. Which are articles that teac us how to apply CISGSection 2 is about formation (rules of formation.Think about: Is there a K?What are the terms of the K?Identify the offer.Indentify the reply to the offer. Identify the reply as either acceptance, rejection, or counteroffer. Sometimes have something that looks like acceptance, but under art 19 is actually a rejection and a counter offer. Or you have performance but not mirror image so question becomes if it was an acceptance of the counter offer. Offers must be definite. Everything is effective upon receipt. Acceptance. In respect to a revocable offer, apply the mailbox rule, Acceptance through course of conduct is the other issue. Section 3 Actual obligation and remedies. CISG trys to have an intent based approach towards K. Section 3Delivery is articles 30-34Art 35 is duty to provide conforming goods. Have to conform to the K, and be fit for any particular purpose expressly or made known to the seller. (This is how CISG deals with warranties of merchantablity.)Problem 3-12 shipping higher quality TVs is still a breach, however the buyer can waive the defect and accept the higher quality of goods. Problem 3-13Note that one of the first things that you need to look at is what is the norm. for part 2 if the norm is based on ordinary tVs you are probably fine, if based on HD TVs then probably not good or falling within the norm. Part 3: not responsible for knowing about these things, unless the rules are same in both states, expressly told, or other circumstances dictate that they should have known. Idea is we want the loss to fall on the buyer, unless the seller actually knew about this, or should have known about it Forces the buyer to have the search costs of finding regulations and correctly conforming goods. Just makes more sense to require the buyer to bear the search costs. Allcatting the risks to the lowest cost avoider. Want to set default rules that allocate the risk to the lowest cost avoider. Part 4: General rule under art 38 is that you may defer until the goods arrive. If you dont inspect then you waive the right because you would have been able to warn the seller within the amount of time. Art 9(2) allows the incoterms to be incorporated into the K (Even if you dont expressly use incoterms but just their wording.)Treibacher Industrie v. Allegheny TechnologiesQuestion is whether or not consignment should already apply or be applied later on. Conflict is between usages of the parties, or usual usages.Usages between parties prevails over customary usages in the trade. 9/19/11Sellers primary obligation is to supply conforming goodsArt 35 deals with non conformity3 ways not to conformmay not conform to Kfit for ordinary purposesfit for any uses expressly or impliedly relayed to the seller. Have to match the sampleConvention does permit the buyer to defer inspection, but that is something that can be waived fairly easily. For example if the buyer inspects prior to shipment he is waiving the right to defer inspection. In a lot of transactions such as CIF or CFR there is an implied requirement that there should be inspection prior to transport, (basic biddell brothers case, cant withhold payment and defer inspection.)Art 36 deals with Latent DefectsArt 37 gives seller right to cure if goods are delivered early. Art 41-43 that deal w/ certain types of property rights .Buyers obligations (basically is an obligation to pay)Art 53-55 Problem 3-14Because the proprosal doesnt include the price in the initial request. (the response would then be a counter offer???)3-15here the price term is the market price, not the $6 quote in the response. So the price that would have to be paid would be the market price at the time the K was validly concluded. There appears to be a conflict between article 14 and art 55 however you have to remember that under art 6 the parties can derogate around art 14. And that is where art 55 steps in. 3-16$ if not otherwise specified, then you hand it over at the place of business at the time of delivery of the goods. Under 58(3) buyer is not bound to pay until after he has inspected the goods, unless it is inconsistent with the structure of the agreement. SummaryHave to pay the price,Art 55 tells us how to determine the price. Rest give details as to when and where obligated to pay the price.Excused performance. Art 79 determines when excused performance applies,Only thing you cant do is sue you can do anything else. Problem 3-17Doing art 79 analysis is ultimately whether or not it is reasonable to perform the K still. Seller always maintains the right to breach the K rather than be forced to complete a bad K. (efficient breach)General rule is interpreted narrowly (a cost increase of 25% to 100% is not going to excuse it. Only when the cost increase is exponential. Prob 3-18Third party excuseFor third party defense both buyer and seller have to be involved (???)RemediesBasic idea is to facilitate cooperation and to make the injured party whole if necessary.

International Business8/9/11 3:23 PM

9/30/11VocabApplicant= party establishing the credit (buyer)Beneficiary= sellerIssuing bank= Applicant gets bank to issue letter of credit to Beneficiary.LoC is K obligating Issuing bank to pay BenefConfirming bank= required to reimburse beneficiary.Nominated bank= can but doesnt have to reimburse Benef.Advising bank = authenticates the LoC.Revocable Credits= can be terminated by the applicant.Irrevocable Credits = what we normally deal with.Problem 4-1Prob 4-3Issuing Bank owes a legal obligation to beneficiary. Confirming bank is not substituting its legal obligation for that of the issuing bank, but they exist separately, therefore the Benef can present to either the issuing or the confirming bank. Prob 4-4(1) Question is whether the terms stating the date. Basically the issuing bank is nominating anybody. (Any bank) it is an open legal commitment to purchase this from any bank. (2) Here is explicitly lists the beneficiary. (presentation to local bank by beneficiary doesnt satisfy the LoC terms. Presentment has to happen before the deadline. Presentation to a nominated bank satisfies both presentation and timeliness, otherwise you can satisfy timeliness but there is no obligation to pay. Prob 4-5Nominating bank can refuse to pay the draft. Prob 4-6Commercial reason for back to back credt is the middle man trying to preserve its value.

Independence principle = LoC is a separate transaction from the sale on which it is based. UCP 600 Art 4(a)Undertaking of bank to supply a letter of credit does not allow the invocation of defense under sales K as a defense under the LoC.Undertaking of the bank doesnt allow defenses to the banks obligation to pay regardless of the relationship between the bank and either the buyer or seller. Purpose of the Independence principle is that banks deal in documents and not in goods, they are god at bearing finacial risks, but not the risk of non-performance. Buyer and seller remain the lowest cost avoider in terms of the actual fulfillment of the K. Second it has to do with preventing bank from having the hold up power that the buyer has currently. Prob 4-7(3) Buyer cant revoke the credit, it is irrevocable according to the default rule. (4) wrongful dishonor of the earlier portions, a wrongful dishonor is essentially a repudiation, damages arent limited to the previous portions instead you can also recover the future portions of the shipment that should have occurred. Urquhart Lindsay and Company, LTD. v. Eastern Bank, LTD.LoC has to include provisions for withholding payment in case of overages, otherwise the LoC just stands. Drafting requires you to include in the LoC a document that provides some sort of protection certificate, and you specify who you want to do the inspecting so that you get exactly what you desire. In Urquhart problem was that the sales K was badly drafted, since there was no firm price. (answer there was to have firm price in sales K.)Larger point is that you should be drafting these documents together. Generally applicant would rather he bank not pay if he can draft that into it, because the transaction costs are much lower. Meara Case (246)Note on Dubai Bank Kenya. Standby letter of credit is not like an insurance, they arent supposed to investigate they are just supposed to declare that there has been non-compliance. 3rd issue is a statement by bank that non-performance has occurred. So here issuing bank would have to investigate so that it could issue the document that is required under the letter of credit. Court required the bank to investigate the issue. 14(h): is a rule that is designed to protect against and random conditions, banks are only asked to verify documents not conditions. You can draft a LoC in such a way that in order to verify a document, a Bank has to verify the underlying conditions of the K. Can read the UCP as stopping short of a mandatory rule that you cant do it. Argument for having this been a mandatory rule, Concern is that the independence principle might be done away with. Independence principle really forces you to include costs ex ante so you are incetivised in paying up front to get good transactional ATT so that there arent as big of costs later if there is an issue.

10/3/11 (Friday:365-380, Mon: 381-394)Strict Compliance PrincipleRayner and Company CaseJust cause it means the same thing is no good, we wont attribute to the bank a knowledge of customs of the trade.

FraudAnd enjoining payment on the standby letter of creditDifference between letters of credit, is standby doesnt require documents issued by third parties. Creates problems in situations where there is concern if performance have actually occurred. Tend to see these only in instances where there is a great disparity of bargaining power between parties. Cases dealing with Iran. Iranian revolution didnt lead to the issues right away. Iranian U.S. tribunal is one of the longest in existence and just will not go away. Legalal difference is that Harrison can claim that there is Fraud rather than just repudiation. Quantum of fraud necessary is more than just a breach of K. Harris is able to say that you are fraudulently mis-representing our ability to conclude. To draft a stanby letter of credit and protect yourself, Require the dec contains specific statements about the manner in which the applicant is not performing. Overview of letter o CreditMake sure the documents line up2 overlying concepts. Fraud as an exceptionBecause of all these things have to take a lot of time up front determining how you want the letter of credit to work. Be very careful in drafting letters of credit.

Finished an entire unit on sales transctions. K governing sale of goods, Letter of CreditLetter of Credit8/9/11 3:23 PMShipping and Delivery

10/10/11Non-Establishment Forms of Business (NEF)Deciding whether you want an FDI or a non-establishment form (NEF) of business turns on the amount of Risk and Control that you would like. NEF business have less risk but also less control especially of IP, FDI has more of both. A lot of NEF business deals with transactional issues that are affected in different states. Be aware that in a NEF scenario you want to hire a local lawyer, and also be very careful with handling your IP internationally. Reasons for establishing FDIElimination of middlemen found in NEFTaking advantage of being an early entrant into the market. Think of the coke example in China. Potentially huge advantages to being an early entrant (offered by the gov)Greater control over management. Easy to replace themLower costsThis might be transaction costs. Intellectual property Ability to control precisely the way that your IP is being used internationally. Also means that you can control the way that it is adapted to local conditions. Definition (pg 366); investment made to acquire a lasting interest in an enterprise operating in an economy other than that of an investor, the investors purpose being to have an effective choice in the management of that enterprise. It is a significant commitment of management and time from the home office. Can involve relocation commitments for them. Also exposing yourself to a host of labor regulations that you wouldnt otherwise be exposed to. (HIRE LOCAL COUNSEL to advice you on the geographic risks)Host nation benefits in the following wayTechnological transfer from origional state to the new host state. Growth of local industry (it might spur the development of local businesses that can support the subsidiary.Employment benefit (you are hiring locals) and are injecting capital into that economy. Key issues here are the capital base and the degree of skill/education that is available in the location of your subsidiary. FDI GrowthIs about 17% of world GDPTransactional aspects of FDI (how do you actually get a subsidiary in host country.)First do your homework on the host company . (HIRE LOCAL COUNSEL)How they deal with investments and M&A Be aware of the treaty obligations of the host government. Want to know about K rulesWant to know about Export rules, both In capital and product . Also want to get letters of intent with your local partners and possibly the local government. (drafted in context of local government law. )Make sure IP protections are in place. May have to set up a local corporate entity. One way you might do this is establish a company to then perform a triabgular merger. Might have construction K or other permits and approvals that you might need. Labor K should be put in place, especially in any country that you are dealing with unions. Risk insuranceSafety and distribution agreements. Problem 6-1 (pg 373)Hard issuesRoads, airports, etc,Electricity, water, heat etc for persons movingTelecommunications such as internet, phones etc. Soft structureWant universities that will boost your employment supplyLocal legal issues/counsel. Political issues (Think of Lybia and how fast that became unstable)This concludes the Business problem

The Legal Problem (What of this gets internationalized)Protection of investment is tied to political stability, and expropriation (taking)SDispute resolution system is also very important in terms of what has been established internationally. Legal framework comes in the form primarily of BIT (Bilateral investement Treaties) Also have ad hoc trearirsCustomary international law= Think of it like common law (no statue or anything anywere) There is a rule about how you identify it, (consistent state practice backed by belief of state) US spends time trying to get people to agree that signing treaties creates customary law BITSMultilateral institutionOld method of resolving disputes was state to state. Had to have continuous nationality. This was before exercising international jurisdictionJurisdiction based on agreement makes it difficult cause you probably arent going to submit to jurisdiction in the face of pending legislation. Difference between diplomatic protection and espousal of claims. Diplomatic exception means that the state is standing up for the persons claim. Keep track that these two concepts are separate. 10/12/11Diplomatic protection is you are representing your citizens interests.A lot of this is lobbying to the state department in order to get them to step in on your behalf. Likely as a result of an expropriation of some type. Espousal means that the government takes over the claim and it ceases to be the citizens claims. Theory is that the claim was always at least partially if not mostly the governments claims. This is important because we now have a new type of sovereign immunity this means that there is the possibility to sue a foreign government in the home state. This is where espousal is important, in order to prevent suits by citizens against foreign states. Problems of using these as meaningful tools to resolve disputes. Main problem is jurisdiction. If you dont have consent to jurisdiction you cant go to an international tribunal. BIT grant jurisdiction in advance. What do we do with multinational corporations. Barcelona Traction Case.No basis for jurisdiction between Canada and spain. Claim could not come forward except form Belgium. ICJ says no because the company was Canadian, regardless of the fact that the majority of SH were Belgium. Almost overruled in the Elsi caseBIT essentially solve this problem by giving us rules about nationality and about investors. Given difficulties with ICJ, what are your other options?Could sue them in the court of the host country. Might not work in more third world countries. For example US already protects foreign investors from takings.Could sue in the home country..Problems with PJ and soveriegn immunity. Most developing countries have programs where lawyers go out with boilerplate terms and try and get countries to sign up for these things. Sometimes also built in to larger treaties such as Nafta. Big advancement here is ICSID which is the big tribunal here, (International Centre for settlement of investment Disputes. To get there both parties must have signed treaty, and both parties must have consented to arbitration. Consent to arbitrate isnt a problem for the investor, problem is how to solve the problem of consent in regards to the respondent state. Most frequently done through BIT. What ICSID doesnt do is choose the substantive law that applies, in absence of a choice, then it is the law of state that is a party, subject to international law, meaning that international law trumps domestic law, however most of the time BITs are going to provide the majority of substantive rules, or identify the law of choice. What do BITs do, how are they?There is very little varaiety from BIT to BIT, most common difference is temporal, not a lot of bargaining going on. They do 3 things, Create a dispute resolution forum (most important thing that they do. )Create a admission of investments. Placing rules on what you have to do to invest. US includes requirement that you open your country to investements. Prohibit countries from dictating performance requirements on the treaty. 3 things that are usually in every treatyFair and equitable treatment. (International minimum standard treatment)US thinks that this is part of customary law, and is part of the international minimum standard, most of Europe disagree thinking that it is a treaty standard that doesnt exist in the rest of the world. This is the floor for standards that you have to be treated with. National treatment obligation,Prevents discrimination against home state and their citizens. Most favored nationCant treat us any worse than you treat the nation that is your best trading partnerThis will sometimes allow a nation to piggyback into another treaty for another party if the host nation has a Best nation obligation. Expropriation Lawful and not against BIT ifIt is carried out w/ publc purposeIs non discriminatoyIs in accordance w/ due processIs accompanied by payment of compensationThis will usually be the most important part, and most arguments are going to be over the amount of compensation received. Includes (Generally) ideas and things that are similar to or tantamount to expropriation. How is compensation dealt with? Hull formula, is what the US announced they thought should be the rule which says that there should be prompt effective and adequate payment for an expropriation. Effective means useful (can be commodities bt not useless currency.)Adequacy is the big question and determining what is adequate can be very challenging. MIGA and OPIC, These are organizations that allow you insure against issues with doing business in areas where the US government has an interest in investing other areas. (also works for other countries.)10/14/11Lanco International Inc. 3 questions regarding jurisdictionIs it an investment?Yes it constitutes an investmentIs it an investment dispute?Yes because there is no requirement that the investors be exclusively foreign. Was there consent of the respondent state and the claimant?This concesnt can be given in the investment agreement itself. Often times it is ex-ante consent in the form of the BIT. Forum selection clauseFinds the provision null and void as matter of local law. It consents under the ICSID convention by Having signed the BIT implied a consent on both parts, and consent once given is irrevocable under the ICSID convention. You can however withdraw from the ICSID convention. A number of countries have, especially in latin America. Wena Hotels, LTd. v. Arab Republic of Egypt. Main juris issue is that Wena while being a foreign national company is owned by Egyptian SH. Issue is that you have an egyption using this treaty to bring a complaint that otherwise would have to be bought by Egypt. This has started Treaty shopping which is exactly like forum shopping just using treaties. 10/17/11Jurisdictional issues that arise in the context of when do we have an investment dispute to which the state has consented jurisdictionWena Hotels (cont.) Basic conclusion is that the purpose of the BIT is to allow the expansion of jurisdiction. Need to have jurisdiction expanding provision or else otherwise it would never qualify as jurisdiction. This is based on academic literature not on the actual legal rulings. Not how different this is in approach to jurisdiction from earlier approaches. In the event of ambiguity the tribunal is leaning towards finding jurisdiction. Jurisdictional issues raised here are similar to the substantive issues. Meaning that to what extent should the law be altered to be more in line. LG&E Energy Corp., et al. v. Argentine Republic. Issue is over fair and equitable agreement. States ability to provide a stable, legal and business environment. Additionally to consider these things the court looks at the investors fair (reasonable) expectations.Must exist and be enforceable by law. Investors fair expectations cannot forget to include business risks, Almost treating the promise of Argentina as an offer capable of acceptance. Non Precluded Measures (NPM) these are parts of BITs that allow exclusions, here in this BIT there was an NPM that allowed what they did in events such as national necessity. According to Article 25 (see bottom of page 405) Would have to be such that there is no way to avoid it. Question is whether or not Argentina meets this requirement. Historically Argentina has not been successful in claiming the necessity/They still dont get off scot free, they are told that they are only excused for a period of time and then after that they should have been able to rebuild/ rework it. NAFTA provisionsMarvin Feldman v. MexicoLaw predated the dispute and therefore Feldman should have expected that he would have to comply with it at some point. Dont have an expropriation here. Fact that tax policies are unfair to some and not to others doesnt make it an expropiation. Tribunal does say that there is a possibility of national treatment. Test for national treatment is to show a national in like situation who is receiving better treatment. This can be de jure or de facto. Here it is a de facto. 10/19/11There is an idea that the fair and equitable treatment imposes a requirement on the Fed Gov to provide certain standards. Although in LG&E it is couched in terms of reasonable expectations it might make more sense to think of it as a promise by the host state to keep things stable. There is a bit of inconsitency and expectations, when one can expect instability. LG&E gives us a window into a way that a gov can shield itself from liability, through demonstration of the necessity defense at least during the portion that the tribunal blocks out. Feldman case (NAFTA) NAFTA is basically the US model BIT. It is a common way of putting in investment agreements. Regional free trade agreements will usually have invstment agreements that resemble BITSFeldman tells us that not every business problem is an expropriation. There is no write to export in international law, Ability to set tax policy is not in international law. 3 requirements; to demonstrate national discrimination.

(Sometimes applied) must be a causal link between foreign nationality and the discrimination. Metalclad Corp. v. United Mexican States. Facts: Metalclad bought another business in order to establish a waste dump, in part because they were under the impression that they already had all the permits. But the previous corp was lacking a local permit. Fed gov tells them to go ahead while getting the local permit. However later told There are three issues that need to be sorted out by the tribunal. Whether or not Govt is responsible for the subsidiary governments?Yes they are, this is a general statement of international law. NAFTA Art 1105, Whether it was fair for the Govt to deny fair and equitable treatments by these events? Basis for courts determination is that the in municipality doesnt have power over non-toxic waste It is a failure of transparency. Transperency comes from NAFTA 1105 because it is read in (doesnt actually appear.) it is found elsewere in NAFTA (Art 102) as a goal of NAFTA and for this reason is read in. Expropriation claim Measure Tantamount to ExpropriationWhat is an expropriation?It is an action or interference which has the effect of depriving the owner in whole or in significant part of the use or expected benefit of use of the object, land, or endeavor. Transparency is not part of the fair and equitable treatment. Reference to international law refers to customary international law, and there is no requirement for transparency in customary international law. Tribunal says that the damages are the same for the expropriation and the fair and equitable treatment claims. Which is the loss suffered to the Corp Only difference in the tribunals decision and the court in UK is the time the expropriation occurred and when it would apply. Methenex case. Facts: a challenge to law in California banning a fuel additive that competes with ethanol. It focuses on the expectations of the investor at the time the investment was made. This is a very sweeping standard, s in Methenex they state that the focus is not on the expectations, but rather the process and nature of the regulation. If it is passed in order of due process and is generally applicable and non-discriminatory then it will not be an expropriation. This is a step back from Metalclad. Part of this is that they went into California and so should have known that there was a heightened risk of environmental regulations being passed that would affect methenex. 10/21/11States ability to do what it otherwise could do is constrained by international law. Metalclad is the high water mark for a pro investor reading of investment law. In some of the jurisdiction cases that we read, tribunals seem willing to give when the text is ambiguous. Tribunals seem to be doing much more substantial readings. In metalclad the tribunal reads in assumption of transparency, even though it was presumably within metalclads ability to find out that they needed the local permit (fair and equitble treatment portion of metalclad)Epropriation portion of metalclad focuses on the reasonable expectations. (this is more expansive than the LG&E reading) It suggests that you have this much more broad expectaion in regards to expropriation. Govt cant take generally pplicable gestures that will impact your investment. Metalclad decision wasnt liked by US Mex, or Canada, because it meant that it could be used in ways that they didnt intend. Enviornmental groups were also upset, it could be used against themNAFTA group issued a note stating that transparency was not part of the statute. Mex appeals the agreement to british court that sets aside fair and equitable treatment portion since there is no obligation of transparency in international law norms. SummaryGovt are liable for subnational govts.National law is no defense to a violation of international law. Still trying to figure out (both in expropriation and fair and equitable teatment) where exactly the line is between the states ability to excersize its police powers and its expectation. Specific promises made by govt to investor create expectations that are protected by investment law. Generally applicable measures where due process is functioning as it should, those will not run afoul of these two obligations. On front end what promises were madeOn back end what was process that was done, to effect the expropriation/fair and equitable treatment. This is the way that metalclad and methenex are more harmonized.

Foreign Direct Investment8/9/11 3:45 PM

10/21/11Hypo: You are US negotiating mining agreement or some other agreement, and local official makes it clear that you will compensate them in order to receive a concession or permit or what not. This is problematic since in a lot of countries this is permissible as a social or cultural matter, therefore in order to be competitive Co. feel a need to be able to participate. Creates line drawing problems; what counts as corruption, in local areas? Additionally it seems to create a race to the bottom problem. If you regulate investors, Fear is that only those countries that dont regulate corruption will have business in places willing to accept and participate in corruption. Why prohibit bribery at all?Dont want these hidden buried costs. Bribery kind of works like tips. They dont get paid very much. Low pay kind of breeds opportunity for corruption. Why might a corp not want to engage in corruption?Predictablility, price of bribe might change. Set a standard that you always have to pay bribes. Legal liabilityConsumer and client fallout. Can be a marketable trait that you dont engage in corruption. This should inform how we think about crafting a regime, what exactly is going to be prohibited, and to whom may they not do it. US becomes leader of anti-corruption laws by passing the FCPAFor a while US was the only country that had a statute like this, that prohibited foreign investors from making bribes. Concern that this disadvantegous US business, fear of keeping the righteous out, keeping out the pretty good but not perfect and leaving only the really corrupt to do buinesses. US tried to get a bunch of treaties through, first being the OECD OECD small group of mostly developed countries, enacted convention that is more or less like FCPA, slightly narrower in scope, w/ about 40 signitories. UN Convention slightly broader than FCPA, around 40 sigs requires countries to enact laws like FCPA. FCPA doesnt say anything about bribes between suppliers, just govt officialsEurope has convention, as well as an inter American convention as welNOTE: US is trying to export FCPA, because of 2 concernsUS wants to level playing field,Cant actually achieve anything with few parties, need more states involved. FCPA Has a criminal statute, because DOJ has boosted enforcement, Can lead to huge monetary penalties, jail time, or complete humiliation if you are caught in this. 2 main provisionaanti bribery provisionsBooking provisionsRequire the books to be kept a certain way, this hopefully making it easier to prevent issues. Apply to IssuersIf you publically trade securities in the US.Domestic concernUS national/citizen or any Co. that is incorp. Or organized in US or has principle place of business in US, (who is not an issuer) Other personsNon nationals who dont meet the above definitions, who unlike the above two, in order to incure liability under FCPA you have to take an act within the US. Liability extends to any agent, owner, SH, etc who is part of a US Corp. Has to be a jurisdictional nexus Meaning you have made use of the phone, wires, etc of interstate commerce. Regulates on a base of nationality in terms of extranationality. 10/24/11The antibribery entites are separated.3 types are coveredIssuersCovered because they touch US capital markets. Covered by the book keeping provisions. Domestic ConcernsThese are US nationals that are organized under laws of USAnyone ElseMeans anyone else but they have to have done something in the US in furtherance of the FCPA5 jurisdictions3 covered entities. US nationals abroad (liable based on nationality.)Statute talks about the recipientsHas to be a foreign official. Def = foreign national organization, governmental agent of foreign state, foreing political parties and intermediaries. Intermediaries = any other person knowing that the money will be given or promised to a foreign party for interests in persuading them in violation of FCPA. Mens Rea is knowing it does not have to be your purpose.If aware, or that a result is substanitially certain to occur, or a belief that such circumstances exist. If you know it is happening you are going to incur liability. Also gives rise to the needs for compliance programs within the corporation. Anything you do that results in this or authorizes this, (or act in furtherance of the doing of this) will violate it under the act. This means that the payment need not succeed, in order to violate the FCPAMens Rea is corruptly For the further purpose of assisting in obtaining or retaining business. 3 parts (3 kind of Mens Rea requirements)Corruption attaches to the actPuspose attach to giving it to the recipientHave to be doing all of that for the further purpose of obtaining or retaining business. There is an exception (D only has to show exception applies, then Burden shifts to P)Grease payment acceptionDoesnt apply to supplying party offical with money for the purpose of expediting the official from performing a routine government action.Retaining permits or licenses for local work, obtaining visas, or police protection. Ministerial actions, not awarding business. Reason for this: trying to strike a balance between disadvantaging American Businesses, and being moral. Seems less bad because these payments arent supposed to be discretionary. 2 affirmative defenses. (D has to prove it applies)If the payment is lawful under the written laws of the host government. If government has made a choice to allow bribery, then the FCPA would be attempting to override the host govts laws which we dont want to do.Reasonable bonafide expenditure related to the promotion of the product. Leveling the playing field for US business. SEC has Civil punishment authorityDOJ has Criminal punishment authorityYou can seek a DOJ opinion letter, to hear ahead of time whether or not what you do would be prosecutable. Because of the way that statute cuts you want to do due diligence on choosing who will represent you in a foreign country. This is because of the amount of knowing as well as intermediary provisions. United States v. KayOECD standard is basically like FCPA so congress in 1998 adds improper advantage to the FCPA to make it more like the OECD, and thus gets added to the list of purposes for which you pay a foreign official. WE have a broad understanding of what is obtaining or retaining business, It is enough that you are altering your cost structure in such a way as to give you a competitive advantage. Case covers the Business Nexus element. Doesnt need to be someone who can get you brand new business. It is enough that they have the ability to influence your costs in operating or continuing business. Stichting Saybolt v. SchreiberComes down to whether the action taken was done corruptly/ Company has plead guilty. Claim is that Co. is collaterally esstopped from re-litigating the issue of whether or not it acted corruptly. Issue: Whether or not corruptly requires you to know that what you are doing is illegal. Ignorance is not defense. If your Att tells you that what you are doing is lawul and not illegal that is a defense to FCPA (there will be some overlap with this and the affirmative defense that if it complies with the law of land) 10/26/11Any act in furtherance of, which means that the bribe need not be completed. Mens Rea of corruptly. Business nexus test looked like a good way to cabin the statute, but it isnt because it is looked at broadly.Doesnt just mean getting new or retaining business. But rather it is enough that you are more profitable in some way. (Kay case)Walk through the cases individually, because 1) exam. 2) because the other party has to show facts sufficient to satisfy each of the elements (in the business nexus test) failure to do so means that the suit will fail. Schticting (Saybolt) [Cont]Saybolt gets advice to bribe official, gets it right when he says that we cant bribe them. Gets it wrong when he says that the dutc can. Knowledge is not required to violate the FCPA. Knowledge that you are potentially violating the host states law is required. Thus this can be a violation of the FCPA. When statute was origionally written corruptly was meant to do more, but subsequent statutes and amendments have clarified where the grease exception exists. US. V. KozenyWe focus on whether the thing was illegal itself, not whether or not you can be held liable for it. You have to have a defense on the merits, not cop out that allows you to escape liability. Extortion and Blackmail, are not affirmative defenses, they go to the mens rea requirements, (granted there is some overlap in this section.)Problem 6-4Fact that everyone is doing it, doesnt matter. Improper advantage isnt measured relative to if everyone is doing it, but rather is measured by whether what the official is doing is improper in the first place. Problem with the business fee is that we dont know the moneyNot a lot of discretion involved, so it might be allowed as a grease payment, Looks like a routine govt action under 78dd1(f)(3)(A)(i)Argument against would be to say that it is so substantial that it is not routine. Closing Fee probably not a grease payment since it would probably not be a routine action, also what are they closing on? and the amount suggests that it is not routine in any sense of the word. Doesnt fall under the affirmative defenses.Under intermediary theory they are still liable since we assume that they have knowledge where they are going to. Consultant is a local consultant so probably not a US national, if he were then he could be liable on the basis of nationality jurisdiction. 6-5Looks like we have a prima facie case. Would have to inquire about if they behaved corruptly, and whether they derive a benefit out of it. Pay attention to the Acts Here there are 2 the night out, and the scholarship for their daughter. Problem 6-6Private bribes are not banned under FCPABut if the corp is gov owned then it will be an instrumentality under the FCPA. 10/28/11 (Summary of FCPA)Covered EntitiesIssuersDomestic ConcernsAny other personAction in the USMens Rea (Corruptly)JursidictionUse interstate commerce (for 1st 2 entities)Wires, mails. Any Act in furtherance of RecipiantOfficial/candidate/ partyIntermediaryPurpose of influence/ improper advantage/ misuse/ Business Nexus TestObtaining/ retaining business

Foreign Corrupt Practices act8/9/11 3:45 PM

10/28/11Corporations act in what is a market for rules (market for law) Therefore they influence a great deal what laws govern over them. There is a values debate and a regulatory debate.OECD claims that the worldwide financial crisis is in part due to Corp greed and dishonostey. Because of this there is a push for greater CSR Problem 9-1There is a brand value that can be affected. There are questions over whether local law will be sufficient? (have to look at other items.)There are certain categories of things that private enterprise canbe held liable for:Cruel and unusual treatment, forced labor, arbitrary detention, etc. Problem 9-2 You can be held liable for violating certain types of human right norms. Argument is if you let companies particpate, then then TNCs will comply with the rules that are made, but the rules that are made will be lowest common denominator. Other side of the argument is that they might be willing to make higher standards to be allowed to participate, GuidelinesThere are a variety of mechanisms that can be used for getting TNCs to sign on and comply with public international law. TreatiesDomestic acceptance of international normsCorporate guidelines etc. Market mechanismsQuestion is how effective each of these are?Might be high acceptance cost which is whey not everyone uses them. OECD guidelines there is a mechanism there but you cant get hauled directly into court if you violate these guidelines. 10/31/11OECD Guidelines.Govts choose to adhere to the guidelines, choosing a national contact point that serves as an organization to receive complaints and strive to resolve them. So even though it is targeted at the OECD, it is still a national function. Investment committee has responsibility of overseeing the guidelines, (and can thus issue rulings about what the guidelines require.)Article 1106 NAFTA (Pg 409) has general requirements included in US model BITs as to what a company can and cant be required by a BIT to do. OECD can be reconciled with NAFTA 1106 because NAFTA is a requirement whereas OECD is a recommendation. OECD is not a treaty. Therefore one is binding one is non-bindingRecommendations are directed at Corp and not at Govt whereas it is more difficult to bind GovtAlthough you can reconcile them in this way, they are conflicting, because you are limiting a states police power, while encouraging corp power. Trying to have a face that you can present to anyone depending on who you are talking too. Number of recommendations that are non-binding. Refered to as soft law. Alien Tort Statute (ATS)This is domestic law incorporating international norms. Statute has been around for a long time but wasnt used for awhile. 3 Prongs to ATS cases1) Applies only to aliens, not Americans. So it was passed to ensure a forum only for Aliens. 2) Exclusive to Torts. 3) Tort has to be in the violation of the law of nations, or a treaty of the U.S. Ordinarily means customary international law. Does it make sense at all to create jurisdiction to torts committed by private party. In 2004 crt gave cert to Sosa case which people had been waiting for. Sosa caseSosa was kidnapped from Mexico to be tried in the US for keeping a DA alive longer so that he could be tortured.Federal common law recognizes certain causes of action relating to kidnapping etc. Judge here says that norm for ATS action must be similar to the 18th century paradigm. After Sosa have to haveCustomary international norm that is comparable to the norms that existed historically at the passage of the ATS> At the very least the same sort of quality. Open considerations Extent to which private actors can be held liable, Do you have to exhaust remedies in your home nation first. Abdullahi v. PfizerCustomary norm is right to not be tested on humans without consent. Have to have Universality; Is the norm universally accepted. Specificity requirement: Sosa gloss, has to be same degree of specificity that existed at time of ATSHas to be of mutual concern to states. 11/2/11Pfizer (Cont)Norm matters, in this case the non-consensual testing on children/individualsWhether or not it is a norm that is capable of being the basis for an ATS suit This is the trigger language for both PIL and IBTAfter a norm you have to have state action. Here there is state action since the government was involved. Sometimes you dont need state action if the issue is especially bad, e.g.; slavery, mass murder etc. Requires state action because it is primarily states that violate international law. Dissent: 2nd circuit held that the ATS does not permit a corporate liability (11th circuit has ruled the other way so we have a circuit split.)2nd cir. Said that there is no norm of international law that provides corporate liabilities. There are other areas where It has been found but they are defective. Supreme court has granted cert and should be decided this spring. (something to watch)ReviewKnow the Pfizer test, to know when something can be an ATS claim.

11/4/11After Sosa need a unversal norm, that is of specificity to a norm that existed in the 18th century, and has to applicable to multiple states. Unless it is the type of action like slavery or mass murder there must be state action. Corporate Social Responsability8/9/11 3:45 PM

11/4/11Europe is a huge market for FDI4 Freedoms. Free movement of goods, services, capital, and persons. Rewe-Zentral v. BranntweinHave to have freedoms for goods to move and be sold. Centros Ltd. v. Selskabsstyrelsen.Freedom of services/entryEuropeans are concerned about race to the bottom. Americans are going to set up a corp subsidiary in the country that has the most favorable laws to you because once you are in you can go anywhere. Competition law. Abuse of a dominant position (Esentially anti monopoly. )The way you view abuse of dominant position, first you have to know what the market is.Define temporal market. (in time)Geographic marketProduct Market (probably the most important.) Seems easy, but he question is if you have two products that are claimed to be part of the same market you look at how they effect the price of each other. Cross elasticity of demand. If $of product A doesnt fall or rise based on the $ of product B, then they are probably different markets. UBC case is in here to deal with this, determining the Market for bananas, are they their own market or are they part of another market.Important part of this case is that the clause at issue infringes on article 86 (art 102 of the TFEU) EU is more regulatory than the U.S., essentially court here is holding that competition laws are going to trump freedom of K here. Cant directly prohibit the resale of product, and you cant retaliate by withdrawing the supply. (this is more drastic than the law in the U.S.) This means you cant just take you US business model and transplant it to the EU. Since there is less deference to freedom of K and more of a concern with the competitiveness of US. Microsoft Corp v. Commission of the European Communities3 product marketsclient PC operating systemsDominant position (90% market share, significant barrier to entry, work-group server operating systems. Dominant position (60% market share,)Streaming media players. This one is the only one that they dont have a dominant position in. The abuse of their dominant position is in two ways, one not giving their interoperability protocols to allow others to write programs for Microsoft. And tying in the client PC operating system and Windows media player. ResultLarge fine ($645 Milliion)Have to license the operating protocols Microsofts main concern is being forced to give up their intellectual property. Refusal to license IP doesnt itself create an abuse of a dominant position, but in these circumstances. Since it relates to a product or service indispensable to the exercise of a particular activity on a neighbouring market.Refusal excludes effective competition on that neighboring market. Prevents appearance of a new product for which there is potential demand. Have to make WMP optional. 11/7/11Mergers have to undergo competitive review.

FDI in EU8/9/11 3:45 PM

11/7/11Dispute Resolution mechanismsMediationResolving the decision through the use of a 3rd party that the parties find agreeableNot usually binding. Hope is to negotiate a resolution with the help of a 3rd party. ArbitrationHas 3rd party private decision maker but the parties have agreed ex ante to be bound by the decision of the private decision maker. Very customizable to the parties desires. Civil litigationWhat we generally think of in terms of Civil litigationOne party can generally unilaterally impose litigation on the other party. Generally this is the default mechanism. Choices that go into resolving disputeChoice of forumChoice of LawWhat law governs the determination of domestic liabilities.

JurisdictionWhen does a court have the power to render a decision. All of these 3 can be determined ex ante. This will cut down on costs and makes it easier to resolve. Forum selection clauseFactors that go into drafting a forum selection clauseConvienience/locationJdxSovereign immunityChoice of law/ substantive of the forumProcedural issues/rules (SOL, discovery, class actions)Enforcement issuesLanguageCurrency IssueAvailable Remedies2 ways to go about this. One is to have a draft that you usually use, and another is to view it in scale for large scale deals Understand that for the client, some of these issues might not be too important since you can price them into the deal.ArbitrationThink of arbitration as a type of forum selectionInvolves private instead of pulic decision makersProcedurally more flexible. Can be kept confidentialCan retain good relations with your clients.Cost is said to be an issue but may not be the caseExpertise may actually be more what has lead to the popularity of arbitration, because you can get experts to arbitrate for you. Arbitration Clause (Things to have included in an arbitration clause)LanguageSitus (Forum) [logistical issues as well as enforcement issues, ideally they have signed the NY convention]Mechanism for choosing panelSubstantive lawProcedural rulesCost issuesScope11/14/11Arbitration and agreements to arbitrate. Congress retains the ability to clearly state that it believes the law is clearly within its rights. Crts will be apprehensive to assume congress intended the forum to be the substantive right. Mitsibishi is the big headline case. Other cases give us the testEnforcement of awards, polytech case gives a 4 part test. (Chapter 2 FAA)Writen agreement covering disputeProvide for arbitration in locationArise out of legal relationship considered commercialIs the party not an American citizen? Or does the party have substantial relation to foreign states. Note Art 5. Overlap with polytech test. Provides statement of grounds Was there failure to give proper notice. Does the scope fall within the origional agreementHas the award been vacated. Public policy exceptionDont have to recognize or enforce an award if it is contrary to the laws of your state. Polytech goes to whether or not there is an agreement.Article 5 goes to that you are supposed to enforce unless there is an exception. Vacature is set out by the FFA4 groundsobtained by fraud or unjust meansmanifest disregard doctrine. Statutory grounds for review set forth in the FAA are the only grounds that the court says cannot be expanded. Circuit split on this question. 2nd circuit says it is a way to think about the statutory criteria. Claim is they manifestly disregard the law if they exceed their powers for engage in this conduct.3 part test for manifest disregard.Bremen v. ZapataCourt has jurisdiction, jdx to send the K to London as the forum selection clause indicates. Costs of resolving the dispute in UK would have been priced in to the K. Presumption in favor of forum selection clauses. Carnival cruise, a commercial case gets the doctrine from this court applied to it. Gota Sports LTDWhat is the test?Is the forum selection clause mandatory or permissive. Permissive forum selection clause provides some predictability, it is essentially consent to be sued somewhere. This could just create a race to file. When the clause doesnt say if it is permissive or mandatory the courts will not presume mandatory without language indicating that the parties intended it to mandatory. Test for validity(Reasonableness). (from Allen)Fraud or OverreachingGrave inconvenienceFundamental unfairnessStrong public policy of forum state. Focus is not on equivalence, only on availability of some remedy.Cost is not a factor, in part because we assume it has been costed into the dealPublic policy can be overcome. The Klaxon principle. State diversity you must apply the substantive law of the forum state, including its choice-of-law11/16/11Choice of Forum SummaryHostility towards choice of forum was that they essentially jurisdictional ouster.All court does by enforcing them is enforce the parties expectations that existed when the made the forum selection clause. Allow you to achieve predictabilityTransactional aspect to it, in that you can price in the costs of litigation into price you ask. Rationale then gets applied in the consumer process after Brenan. Descrepancies in a forum selection clause will not make it unreasonableCost Differecnes in procedures, like discovery procedures, Differences in remedies dont matter as long as there is access to remedy. Choice of court agreements. It was pretty easy back in the day to get enforcement of an arbitration agreement. And difficult to get enforcement to choice of court. NY convention, hague convention (when it comes into effect) has same structure, have to enforce forum selection clauses, and have to enforce judgements. Practical application of hague convention is to drastically reduce forum non-convience grounds. They agree not to enforce forum selection clause where the case will be removed on forum non-convience grounds. 60% of the time when there is a forum non-convience clause it is applied, (usually used in America if it looks like foreign law will have to be applied, they would rather send it to the state whose law should be used. Choice of law clauses. For exam purposes dont need to know choice of law in detail only need to know the choice of law rules that are in CISG. Dont need to know anything more than the names of approaches in the case of determining whose law applies. (are responsible for knowing the international law that allows you to use it through treaties.)3 tests areLexloci test: traditional approach, place of the K. (difficult to figure out in modern time) Significant relationship: balancing test, hard to know what way it will come out, no real definite answers. Governmental Interest analysis: try to figure out whether or not there are conflicts between the jurisdictions, if there arent actuall conflicts then it doesnt matter, if there is atrue conflict then you go to significant interest approach. Foreign sovereign immunityHighly contested area. Huge, and quickly adaptingUsed to be if you were sovereign you were completely immune. In 1950s with communism state owned enterprises were getting complete immunity. After that didnt seem fair you got restrictive sovereign immunity that was left only to actions that related to governing. Tate letter in 1911 from state department to courts and used that to determine if sovereign immunity applied. Approach became not that popular. As a result congress stepped in with rule on whether state was immune.Trans Chem caseCNMC is trying to claim sovereign immunity. First inquiry is whether or not the US gov has jurisdiction over them, because of sovereign immunity. To determine whether or not they are a agency or instrumentality of a foreign state. Determining this is a 3 part testSeparate legal person, corp or otherwiseOrgan of a foreign state or political subdivision. Not a citizen of the US., nor created under the laws of any third country. Court determines as a matter of law the corp being majority owned by state, is an organ of the state. (if majority own dont need to worry about it.)They are presumptively immune. Then you have to look to see if there is an exceptionThere is an exception for arbitrations that take place in the US Also there is an exception for arbitrations in treaties that are in force between the parties. Foreign immunity of stateFirst question is are we dealing with a sovereign state, if so presumptively immune. Next see if any of the exceptions to the FSIA apply. Number of potential immunities listed page 684.A note on Commercial activity Immunity. To determine if something is a commercial activity you look at the nature of the activity, not the purpose. Direct affects in the US, require that the effect be primarily in the United states. Debt or breach of K abroad is not sufficiently direct in the U.S. Remember waiver, commercial activity, arbitration agreement, these are the big ones. Act of state doctrine. 11/18/11 FSIOrigionally there was the idea of absolut immunity, there is a international requirement that you afford foreign sovereigns immunity. Domestically it is an application of FSIA In 1950s there was more of a mixing of the state and foreign form.US developed restrictive form of soverign immunity. Meaning only granted for soverign functions. Origionally the US relied on