An interesting article by Boris Schinkels (University of Heidelberg) has been published recently in the European Community Private Law Review (GPR 2007, 106 et seq.):

Die (Un-)Zulässigkeit einer kollisionsrechtlichen Wahl der UNIDROIT Principles nach Rom I: Wirklich nur eine Frage der Rechtspolitik?

The English summary reads as follows:

Article 3 (2) of the Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005) 650 final, stipulates the autonomy of the parties to choose sets of “rules” as applicable “law” of the contract that do not necessarily form part of the valid law of a state. Yet, current political reluctance towards this extension of party autonomy to non-state rules will presumably result in the deletion of this part of the provision in the legislative process towards the Rome I-Regulation. This contribution especially analyses the assumption that chosen law could be applied “as such”, on which traditional reservation in choice-of-law methodology against the eligibility of non-state law like the UNIDROIT Principles as the substantive “law” of the contract are based. It can be shown that this assumption results from an erroneous concept of “validity” of law. Hence, the traditionalist view not only ignores the general guarantee of freedom for any individual, but also the principle of equal treatment of equal situation as warranted by the EC Treaty with precedence over secondary law such as regulations on choice of law.

Highly recommended.

Continuing the trend of interesting private international cases coming out of the patent and copyright fields (see previous posts here and here), the Second circuit recently decided a case involving the enforcement of a French judgment involving copyrighted dress designs.

In Sarl Louis Feraud International v. Viewfinder, Inc., 2007 WL 1598057 (2d Cir. June 5, 2007), a French court held, by default judgment, that Plaintiff’s copyright in the actual design of dresses was infringed by Defendant’s taking photographs of them and placing them on a website. Enforcement was sought in the U.S. under New York State law. Judge Lynch refused to enforce the French judgment on the grounds that it would be repugnant to the public policy of New York as it would violate Defendant’s First Amendment rights. 406 F. Supp. 2d 274 (S.D.N.Y. 2005). Lynch said it was obvious that Defendant’s activities fall within the protections of the First Amendment, because they are “matter[s] of great public interest, for artistic as well as commercial purposes. . . . [T]he extensive coverage given to such events in various mass media makes clear that there is widespread public interest in these matters.”

Judge Lynch said a conflict arises when U.S. courts are asked to enforce judgments from countries that do not have First Amendment protections.

“Many democratic countries, which share our general commitment to human rights and maintain free and open societies in which freedom of speech and thought is fully respected, differ from us in the resolution of certain questions involving the balance between freedom of expression and the maintenance of ordered liberty, particularly in areas where freedom of expression may be in tension with the protection of other human rights, such as equality or human dignity. . . . Even in those areas, however, where reasonable people and decent societies may reasonably disagree, American courts have recognized that foreign judgments that run afoul of First Amendment values are inconsistent with our notions of what is fair and just, and conflict with the strong public policy of our state.”

The judge noted that the First Amendment protects speech that can be banned in other democratic countries, and courts in the United States have refused to enforce foreign judgments such as one that restricted access to Nazi propaganda in France. American courts also have refused to recognize English libel judgments that would be inconsistent with the U.S. Constitution or the laws of the states.

The Second Circuit just reversed, 2007 WL 1598057 (2d Cir. June 5, 2007). The court began by noting the rule of comity inhering to default foreign judgment, and held that, “for the purposes of this action, we must accept that Viewfinder’s conduct constitutes an unauthorized reproduction or performance of plaintiffs’ copyrighted work infringing on plaintiffs’ intellectual property rights, and the only question to consider is whether a law that sanctions such conduct is repugnant to the public policy of New York.” In so considering, however, the Court held that Judge Lynch had not “conducted a full analysis” of the issue.

In particular, the Second circuit refused to allow Defendant to rest its defense entirely upon its status as a news magazine covering a public event. Because “[i]ntellectual property laws co-exist with the First Amendment in this country, . . . [t]he First Amendment does not provide such categorical protection.” Rather, in deciding whether the French Judgments are repugnant
to the public policy of New York, the district court should:

“first determine the level of First Amendment protection required by New York public policy when a news entity engages in the unauthorized use of intellectual property at issue here. Then, it should determine whether the French intellectual property regime provides comparable protections.”

On the first prong of the test, the court directed exclusive use of the “fair use doctrine,” which “balances the competing interests of the copyright laws and the First Amendment” under a four-factor test. Because the district court analyzed the “fair use doctrine” in a single sentence, and the record as it stands was insufficient for the court to decide it here, the decision was vacated and the case remanded to be addressed on a “fully-developed record.” The court also directed a more in-depth examination of the second prong of the analysis under Fed. R. Civ. P. 44.1, i.e. “the manner of protection afforded plaintiff’s fashion shows by French law.”

Because the court seemed to place any First Amendment defense to foreign judgment enforcement exclusively within, and not in addition to, the “fair use doctrine,” Commentators have already acknowledged that “[t]his is a major decision.” The court also seems to acknowledge that, if Judge Lynch concludes that Defendant’s use of plaintiff’s intellectual property would be fair under U.S. law (regardless of whether it would be permitted under French law), then the judgment cannot be enforced.

A provisional version of the Rome II joint text which was agreed upon by the European Parliament and the Council in the meeting of the Conciliation Committee held on 15 May 2007 has been made available on the Rome II page of the EP’s Conciliations & Codecision website.

The text has been released only in English, and subject to further legal linguistic verification.

A first glance at the text reveals that the general rule in Art. 4, and the special rules set out in Articles 5 (Product liability), 7 (Environmental damage), 8 (Infringement of intellectual property rights), 9 (Industrial action), 10 (Unjust enrichment), 11 (Negotiorum gestio) and 12 (Culpa in contrahendo) are almost identical to the corresponding provisions of the Council’s Common Position, adopted in September 2006.

The Council’s text has been retained also in respect of the provision on party autonomy (Art. 14): accordingly, an ex ante agreement on the applicable law is allowed, “where all the parties are pursuing a commercial activity” and such an agreement is “freely negotiated”. The law designated by the conflict rules on unfair competition and infringement of IP rights cannot be derogated from by the parties.

As regards the most controversial issues, on which the Parliament had proposed a number of amendments in its Legislative Resolution at Second Reading of January 2007, here’s the outcome of the Conciliation:

Unfair competition and acts restricting free competition (Article 6):

While the conflict rule governing an act of unfair competition is unchanged (application of the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected; application of the law determined pursuant to the general conflict rule of Art. 4, where an act of unfair competition affects exclusively the interests of a specific competitor: see Art. 6(1) and (2)), a more complex provision, allowing the application of the lex fori in case of multi-state torts, is set out by Art. 6(3) for non-contractual obligations arising out of a restriction of competition:

(a) The law applicable to a non-contractual obligation arising out of a restriction of competition shall be the law of the country where the market is, or is likely to be, affected.

(b) When the market is, or is likely to be, affected in more than one country, the person seeking compensation for damage who sues in the court of the domicile of the defendant, may instead choose to base his or her claim on the law of the court seised, provided that the market in that Member State is amongst those directly and substantially affected by the restriction of competition out of which the non-contractual obligation arises on which the claim is based;

where the claimant sues, in accordance with the applicable rules on jurisdiction, more than one defendant in that court, he or she can only choose to base his or her claim on the law of that court if the restriction of competition, on which the claim against each of these defendants relies, directly and substantially affects also the market of the country of that court.

Violation of privacy and rights relating to the personality (including defamation):

This issue, that has been by far the most controversial in the codecision procedure (a specific rule – Art. 6 – was proposed by the Commission in its initial Rome II Proposal, and strongly advocated by the Parliament, in a very different text, both in its First and Second Reading – see Art. 5 and Art. 7a respectively), has been excluded from the material scope of application of the Regulation (see Art. 1(2)(g)). It is dealt with in the review clause provided by Art. 30(2):

Not later than 31 December 2008, the Commission shall submit to the European Parliament, the Council and the European Economic and Social Committee a study on the situation in the field of the law applicable to non-contractual obligations arising out of violations of privacy and rights relating to personality, taking into account rules relating to freedom of the press and freedom of expression in the media, and conflict of law issues related with the Directive 95/46/EC.

Damages in personal injury cases and traffic accidents:

The issue of quantifying damages in personal injury cases (especially in, but not limited to, case of traffic accidents) has been one of the main concerns of the EP Rapporteur Diana Wallis, who supported the application of “the principle of restitutio in integrum, having regard to the victim’s actual circumstances in his country of habitual residence” (see Art. 21a of the EP’s Second Reading).

Due to the disagreement of the Commission and the Council, such a provision has not been inserted in the Regulation, but Recital 33 of the joint text states:

According to the current national rules on compensation awarded to victims of road traffic accidents, when quantifying damages for personal injury in cases in which the accident takes place in a State other than that of the habitual residence of the victim, the court seised should take into account all the relevant actual circumstances of the specific victim, including in particular the actual losses and cost of after-care and medical attention.

As regards the law applicable to road traffic accidents, the Regulation does not prejudice the application of the Hague Convention of 1971 on the law applicable to traffic accidents (see Art. 28): however, the review clause calls on the Commission to prepare a study on the effects of the Convention’s supremacy, that will be included in the Report on the application of the Regulation to be submitted not later than four years after its entry into force (Art. 30(1), second indent).

Treatment of foreign law:

This issue was raised by the European Parliament (see Art. 12 and 13 of the First Reading and Recital 29b and 30a of the Second Reading), but given its general relevance in a private international law system, it has not been regulated in the context of a specific instrument such as Rome II. The review clause in Art. 30(1) provides that the Report to be prepared by the Commission shall include

a study on the effects of the way in which foreign law is treated in the different jurisdictions and on the extent to which courts in the Member States apply foreign law in practice pursuant to this Regulation.

Public policy and overriding mandatory provisions:

The public policy clause (Art. 26) does not include any reference to the question of punitive damages, nor any reference to a special concept of EC public policy, in its content and vis-à-vis the application of the law of a Member State. Punitive damages are addressed in Recital 32, according to which

Considerations of public interest justify giving the courts of the Member States the possibility, in exceptional circumstances, of applying exceptions based on public policy and overriding mandatory provisions. In particular, the application of a provision of the law designated by this Regulation which would have the effect of causing non compensatory exemplary or punitive damages of an excessive nature to be awarded may, depending on the circumstances of the case and the legal order of the Member State of the court seised, be regarded as being contrary to the public policy (“ordre public”) of the forum.

As regards overriding mandatory provisions, only the provisions of the lex fori are taken into account by Art. 16 (whose text is almost identical to Art. 7(2) of the Rome Convention). While the exclusion of the overriding mandatory provisions of a law different from the lex causae and the lex fori has been criticized, problems may arise if a different compromise is finally found in Rome I (the issue is currently under debate in the Council: see the title of Council doc. n. 9765/07, not accessible to the public).

As a last point, Articles 27 and 28 deal with the relationships with other provisions of Community law and with existing international conventions (as the above mentioned Hague Convention of 1971 on the law applicable to traffic accidents, or the Hague Convention of 1973 on the Law Applicable to Products Liability), in a traditional way, if compared with the coordination clauses that were proposed in earlier stages of the procedure (see for instance Art. 1(3) and Art. 25 of the EP’s First Reading):

Article 27 – Relationship with other provisions of Community law

This Regulation shall not prejudice the application of provisions of Community law which, in relation to particular matters, lay down conflict of law rules relating to non contractual obligations.

Article 28 – Relationship with existing international conventions

1. This Regulation shall not prejudice the application of international conventions to which one or more Member States are parties at the time when this Regulation is adopted and which lay down conflict of law rules relating to non contractual obligations.

2. However, this Regulation shall, as between Member States, take precedence over conventions concluded exclusively between two or more of them insofar as such conventions concern matters governed by this Regulation.

Pursuant to Art. 251(5) of the EC Treaty, the European Parliament (by an absolute majority of the votes cast) and the Council (by a qualified majority) must adopt the Regulation within six weeks from the date of approval of the joint text.

The vote in the European Parliament is expected in the plenary session on 9-10 July in Strasbourg (see the OEIL page on Rome II). The JHA Council, under the German Presidency, is scheduled in Luxembourg on 12-13 June.

[Update 9 June 2007: as stated on a Press release by the Council, the Presidency will deliver an oral report about the result of the conciliation with the European Parliament in the JHA session of Wednesday 13 June 2007]

Here’s a quick roundup of significant caselaw from the U.S. Court of Appeals and Supreme Court relating to private international law issues.

Two interesting actions relating to judgment enforcement have come down from the Ninth and D.C. Circuits. The latest salvo in Ministry of Defense for the Armed Froces of the Islamic Rep. of Iran v. Elahi, No. 03-55015 (9th Cir., May 30, 2007), seems to complete a tortured case history that included a Supreme Court decision, and ICC decision and several appellate decisions relating to the enforcment of a judgment for wrongful death agains the Republic of Iran. Plaintiff, whose brother was allegedly assassinated by agents of the Iranian state, sought to enforce the $11.7 million default judgment he received in the United States District Court for the District of Columbia. Unable to seek satisfaction of that amount under the Foreign Sovereign Immunity Act – a conclusion that was affirmed again here on appeal – plaintiff sought a lien against a $2.8 million ICC judgment in favor of Iran from its previous breach of contract action against an American defense contractor. The Terrorism Risk Insurance Act permits such an action against “terrorist parties,” provided that the judgment was not currently “at issue” before an international tribunal. Because the ICC judgment was “present[ed],” “fully adjudicated” and “reduced to judgment” in favor of Iran, and because Iran has been labelled as a “state sponsor of terrorism” since 1984, the amount currently held by the American contractor is vulnerable to attachment. Interestingly, the U.S. Government filed papers in support of Iran in this action. The full decision is available here.

The D.C. Circuit in Termorio S.A. v. Electanta S.P., No. 06-7058 (D.C. Cir., May 25, 2007) refused to enforce an arbitral award from the Republic of Columbia between a state-owned entity and two American utility companies. At issue was a $60 million arbitral award against the Columbian entity. The award was made in Columbia. Immediately thereafter, various Columbian government agencies refused to comply with the award and began criminal investigations of executives who worked for the plaintiff in that action. The award was eventually vacated by a Columbian court. Plaintiff then sued in U.S. federal court to enforce the award, notwithstanding its anullment. “[R]esolving this matter with reference to . . . the New York Convention,” particularly Article V(1)(e), the court held that once an award is lawfully set aside in its place of origin, there is nothing to enforce under that Convention. An interesting discussion of the discretion of U.S. courts to enforce such awards despite a foreign anullment followed. While the court,

accept[ed] that there is a narrow public policy gloss on Article V(1)(e) and that a foreign judgment is unenforceable as against public policy to the extent that it is ‘repugnant to fundamental notions of what is decent and just in the United States,’

Plaintiffs here failed to meet this high threshold. The full decision is available here.

The Eleventh Circuit decided an interesting case applying the “most significant relationship” test to determine the law applicable to a cross-border tort of tortious interference. In Grupo Televisa S.A. v. Telemundo Comm. Group, Inc., No. 05-16659 (11th Cir., May 10, 2007), a Mexican broadcast company sued its American rival in U.S. federal court alleging that it thwarted its contract with a Mexican soap opera star by offering her a competing role. The American company moved to dismiss the claim by arguing that Mexican law, which does not recognize the tort of tortious intereference with contractual relations, governs the dispute. The district court agreed and dismissed the case, holding, inter alia, that the “place of the injury” should not play an important role in this choice of law decision. The Eleventh Circuit reversed that decision. It began by reference to Section 145 of the Second Restatement, and the four “contacts” that should be considered in a tort action. It then considered the “principal location of the defendant’s conduct” as the single most important factor in a “misappropriation of trade values case,” and held that “the Florida contacts are both numerically and qualitatively more significant” here. Turning to the general factors in Section 6 of the Second Restatement, the court also recognized that “the relevant policies of the forum [and] other interested states,” the “protection of justified expectations,” “certainty, predictability and uniformity of result,” and “the ease in determination of the law to be applied” counselled the application of Florida law. The full decision is available here.

Finally, the Supreme Court invited the Solicitor General to file a brief in a notable conflicts case. In Teck Cominco Metals v. Pakootas, Petitioner posed the interesting question of,

[W]hether the Ninth Circuit erred in concluding, in derogation of numerous treaties and established diplomatic practice, that CERCLA (and, by extension, other American environmental laws) can be applied unilaterally to penalize the actions of a foreign company in a foreign country undertaken in accordance with that country’s laws.

The Petition and other briefs at that stage are available here.