Outline For IBT

International Business Transactions Outline 2015
INTRODUCTION
I. What do we worry about when we deal w/ international transactions?
A. Customs/tariffs
B. Ship’g costs (bill of lading)
C. Local req’ts
1. Product standards
2. Health/safety
3. Product liability
D. Currency
1. How are they going to pay?
2. Exchange rates
3. Hard v. soft
i. Mercantile definition measuring the confidence level in the currency
4. Fixed v. Floating
i. Fixed- China, Malaysia, HK, India>fixed to USA
ii. Floating- USA
5. Control v. Uncontrolled- amt of control the gov’t exerts over a particular transaction
i. Control-convertibility (third world countries)
ii. Uncontrolled
iii. Can have fixed & controlled or either of the two alone
6. Hedging- investigate if you should hedge
E. Trade Barriers
1. Sanctions, quotas, trade agreements
F. Pmt
1. Pmt mechanism
2. Don’t ship until paid
i. Letter of Credit
G. Intellectual Property Protection
H. Distribution agreements/issues
I. Cultural Issues
1. Consumer preferences-advertising/marketing
2. Weights/measures
3. Packaging
J. Language-of K and negotiation
K. Distance/ship’g
L. Pricing
M. Tax
N. Dispute Resolution- what law applies
1. Jurisdiction
2. Forum
i. Court, arbitration, or mediation
O. Local Regulation
1. Labor law, environment, unequal enforcement
P. Infrastructure/Security
Q. Foreign Laws
1. Civil/CL
2. Federal Bill of Lading Act
3. Carriage of Goods at Sea Act
4. Convention on the International Sale of Goods (CISG)
R. Direct foreign Investment Laws
1. Real estate
2. Do you need a local partner?
3. Minimum amt you need to invest?
4. Req’d re-investment?
II. Mediating Or Protecting Against Risks
A. Get a 3rd party inspector
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B. LoC
C. Hedge
D. Insurance
E. Get a lawyer
III. Basic Steps of an International Transaction (5)
A. Sales K
B. Financing (Letter of Credit)
C. Ship’g of Goods
D. Seller Gets Paid
E. Delivery of goods-receipt and collection of goods
CH. 4: AGREEMENTS FOR THE INTERNATIONAL TRADING OF GOODS

I. 4.0: The Basic Transaction-Toys to Greece- Tracing the sale of toys b/t Santa Claus company (seller) in NY and Alpha
Company (Buyer) of Athens Greece.
A. Factors to Consider: How Int’l Com. Trans. Differ from a domestic one? Must look at risk factors:
1. Buyer v. Seller Risk
i. Seller- not being paid after ship’g the goods
ii. Buyer- worries about paying when goods have ship’d or arrived.
a. Also worries about quantity and quality of goods
2. Pmt-
i. Currency - sales Ks must specify this b/c risk of currency fluctuation
3. World Events
i. Geopolitical events
4. How does the trading community respond to these risks? Two things:
i. Special Language in the K
a. FAS- Free Along Side
b. CIF- Cost, Insurance, and Freight
c. FOB- Free on Board
ii. Break risk down into many small and measurable risks
a. Documentary transactions-3 most important Ks
1. Sale K (buyer & seller)
● Identifies goods, sale price, condition
● Pmt term
2. Letter of Credit (buyer’s bank & seller)
● Should be irrevocable
● Can also have it confirmed by seller’s bank. Seller’s bank says “we confirm the credit”
- Possible to have it not confirmed; if so, will involve “advice of credit”
● LoC will specify what docs are needed to est. necessary proof that goods were ship’d
● May be subject to standards
3. Bill of lading (seller & carrier)
● States which arrangement is made
● While sales K states which arrangement is to be made
B. The Sales K
1. PROFORMA INVOICE- offer (buyer’s request of price quotation)
i. Indication of sale terms:
a. Pmt and ship’g terms
b. Preferred method of handling insurance during transit
2. PROFORMA INVOICE- to buyer from seller
i. Gives multiple price options to buyer
3. PURCHASE ORDER FORM
i. Duplicates the pricing in the proforma invoice
ii. May or may not have small print on reverse side
a. Pay attention to Battle of the Forms issue
C. The Letter of Credit- A promise by buyer’s bank which runs directly to seller that buyer’s bank will pay the sales K amt to
seller, if seller produces the docs req’d by the sales K which evidence that seller has ship’d the goods req’d by the sales K
1. Purpose:
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i. Ensure proper transfer of funds
ii. Permits rapid payment by banks, while imposing upon the parties, the cost & hassle of pursuing legal remedies
2. Buyer arranges for its bank to issue the LoC that is confirmed by bank in sellers area
i. Can be revocable or irrevocable
ii. Confirmed or non-confirmed
a. Confirmed= confirmed by local bank of seller
D. Seller Ships the Goods
1. SHIPPER’S LETTER OF INSTRUCTION- Seller must give detailed instructions to the forwarder
i. Make sure the labeling/markings are done correctly so the BoL and LoC match
2. COMMERCIAL INVOICE
3. PACKING LIST
4. ELECTRONIC EXPORT INFORMATION FORM- US gov’t req’t
5. CERTIFICATE OF ORIGIN FORM
6. DOCK RECEIPT FORM
i. After seller has transported goods to Carrier’s pier
ii. Covers the goods until names vessel arrives
7. BILL OF LADING
i. Issued by carrier when vessel arrives & goods are loaded on board
ii. Req’t of buyer to provide a LoC is bargained for in the sales K
a. If K merely states “pmt against documents” → does not est. a req’t for a LoC; merely obligates buyer (not a
bank) to honor the draft that accompanies the BoL
iii. Forwarder fills out the form stating the following (and gives to seller):
a. Description of the goods
b. Description, markings, and weight of crates or containers as directed by shipper’s letter of instructions
iv. Carrier promises to take goods to names destination & seller promises carrier’s fee will be paid
v. Prepaid or collect
vi. Non-negotiable v. Negotiable
a. Non-negotiable- carrier promises to deliver the goods only to the person names as recipient
b. Negotiable- carrier promises to deliver the goods only to the person who is in possession of the bill of lading,
properly indorsed.
vii. Clean on board
8. INSURANCE CERTIFICATE FORM (if CIF)-insurance company will limit its risks to a stated value, a names
vessel, and transportation b/t designated placed
E. Seller Obtains Pmt; Buyer Obtains the Goods
1. SIGHT DRAFT- seller draws on buyer’s bank, ordering buyer’s bank to pay seller from the credit created at buyer’s
request and for buyer’s account
i. Negotiable instrument used as a legal vehicle for pmt under LoC
a. LoC usually states that the bank “undertakes to purchase all drafts drawn as above specified”
II. How Sales K Works if Nothing Goes Wrong-- Summary
A. Stage 1 - buyer and seller form a sales K req’g pmt via confirmed LoC
1. Seller & Buyer negotiate a K
2. Seller won’t sign K until it known reliable bank will pay if Seller delivers the goods
3. Seller insists on a confirmed irrevocable LoC from Buyer’s bank
i. Means 2 banks are on the hook if Seller delivers as promised in the LoC
B. Stage 2
1. Seller/Shipper enters K w/ Carrier to transport the goods to Buyer’s location
i. Note: “To Order of Shipper” is the identified consignee
a. Makes the paper negotiable; it can be endorsed by others
2. Shipper/Carrier K is the BoL, Upon getting the goods, Carrier gets paid freight charges and issues BoL to the Shipper
i. 2 purposes
a. K to carry the goods
b. Receipt for Cargo being sent (K for bailment)
ii. Non-negotiable (Straight) BoL: Carrier promises to deliver the goods to the named consignee (Buyer)
a. Only consignee has rights to the goods
b. Carrier fulfills duties upon delivery to consignee
iii. Negotiable BoL
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a. Carrier promises to deliver the goods to “order of shipper.”
b. This means BoL serves 3rd purpose: Document of Title for the goods
c. LoC transactions usually req negotiable
3. Details of arranging the ship’t may be handled by the “freight forwarder” (look at forwarder’s fees in the pro forma
invoice)
4. Carrier may be req’d to produce docs in addition to BoL, depending on the LoC
i. Commercial Invoice
ii. Electronic export info form
iii. Certificate of origin (based on laws of Buyer’s country)
iv. Insurance for ship’t
v. Certificate of inspection
a. use of a documentary transaction may deprive the buyer of the ability to inspect the goods, but a 3rd party
inspection certificate fixes it
C. Stage 3 – Seller gets paid
1. Seller takes docs to Seller’s bank
2. Seller attaches a “Draft” or “Bill of exchange” to the docs, which bank had agreed to honor in the LoC
3. Bank checks docs and compares them to LoC to insure strict conformance; seller endorses the draft and the negotiable
BoL
4. If all in order, Seller is paid in accordance w/ the draft
D. Stage 4 - Seller-Buyer’s Bank
1. Seller’s bank endorses draft and presents it (presentment), along w/ endorsed BoL and other docs to Buyer’s bank
2. Buyer’s bank is obligated to accept/honor the draft & reimburse Seller’s bank if docs are conforming
E. Stage 5 – Buyer Pays and Gets Goods
1. Buyer’s Bank presents docs to Buyer
2. Buyer pays
3. Buyer gets BoL, which entitled Buyer to the goods from the carrier
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III. 4.1: Formation of An International Transaction: Insulation to Germany-Universal Pipe (a Kansas manufacturer) sells
insulation to Eurobuilders. Purchase orders and responses differed by the governing law (universal says Kansas, Euro says
England). There was a problem w/ the insulation (dispute). Situation A has Euro headquarters in London, and situation B has
Euro’s headquarters in Germany.
A. PART A - The Traditional Analysis-Conflicts of Law
1. Nafziger - The Louisiana & Oregon Codifications of Choice-of-Law Rules in Context
i. most significant set of statutory choice-of-law rules is the UCC
ii. Does the law bear a “reasonable relation” to the “State or nation” whose law is selected?
a. If parties cannot agree- apply “an appropriate relation” to the state test
1. Minimum contact
2. Brand - European Market & US Centrifuge: 10 Selected Private Int’l Law Developments of 2008
i. Article 3 of Rome I regulation-
a. A K shall be governed by the law chosen by the parties
b. Untrue if elements relevant to the situation are located in the other country
ii. Article 4- if no law is chosen by parties:
a. K for sale of goods governed by law of the country where seller has habitual residence
b. K for provision of services governed by the law of country where service provider has his habitual residence
3. Juenger - EEC Convention on Law Applicable to K’l Obligations: US Assessment
i. problem of law applicable in absence of a K’l choice
ii. Under the restatement, to determine choice of law it uses the “most significant relationship” test
4. J. White - UCC
i. Battle of the forms § 2-207 of the UCC
a. Occurs when seller and buyer forms diverge
1. Diverge not only in substantive terms but also in permissible methods of K formation
2. More often than not, 1 or both will perform/start to perform and a dispute will break out
● KNOCK-OUT RULE - apply gap fillers
- Modern rule in comparison to old English “last shot” rule or mirror image rule
b. UCC 2-316 - use of terms “as is” or “w/ all faults” expressly discliam an implied warranty of merchantability
5. QUESTIONS REGARDING FACT PATTERN (London HQs)
i. If filed in England-apply Rome I
ii. If filed in Kansas- apply UCC
iii. Have the parties agreed on either choice of law? STEPS:
a. Did party create a K? YES
b. Was there a clause in the K? YES
iv. EU GR- we said to apply Rome I- seller’s habitual residence- therefore Kansas Law would apply
B. PART B - Enter International Law (CISG)
1. Second fact pattern, where headquarters are in Germany:
2. Brief Intro: CISG (United Nations Convention on Ks for the International Sale of Goods)
i. Governs b/t the USA and 60 other countries (think of it as a new federal law system to govern Ks b/t these
countries)
a. Article 1- sale of goods K must be international and also bear a stated relation to a K’g state before the K can be
governed by the convention
b. Parties may expressly determine not to be governed by the convention (opt-out)
ii. Applies the Knock-out rule w/ the application of gap fillers in these battle of the forms situation
3. Hanwha Corporation V. Cedar Petrochemicals, Inc - Cedar (NY based seller) and Hanwha (S. Korean based buyer)
exchanged standard business forms. The 2 forms differed in their choice of law (cedar-NY, Korea-Singapore). Dispute
arose.
i. Question - whether CISG, some other law, or both, governs the question of K formation?
a. The intent to opt out of the CISG must be set forth in the K clearly and unequivocally
1. Absent this, the CISG governs all Ks b/w parties w/ places of business in different nations, so long as
they are signatories of the convention
b. Here both nations opted-out, but never agreed to a substantive law to displace the CISG- so CISG is used to fill
the void
4. Dimatteo - Interpretive Turn In Int’l Sales Law: Analysis of 15 Yrs of CISG Jurisprudence
i. 2 questions arise when there is a dispute:
a. Was a valid K formed despite existence of conflicting, non-dickered terms?
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b. If a valid K was concluded, what are the terms of the K?
ii. Article 19(1) of the CISG
a. An offer that contains additions limitations or other modifications is a rejection of the offer and constitutes a
counter-offer.
1. 19(2)- If the additional terms do not materially alter the offer, a valid K is formed and the additional terms
enter the K unless the receiving party promptly objects
b. Article 19’s reach is limited to issues of K formation & not to modifications of K
iii. Article 19(3) of the CISG
a. Sets a broad materiality standard-
1. Price, pmt, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to
the other or the settlement of disputes-
● These are all terms that would materially alter the offer
iv. Basically CISG Art. 19 is an adoption of the now-discarded CL mirror image rule w/ minor diffs
a. When parties have agreed on the essential terms of the K for the sale and have performed, but there is a dispute-
APPLY KNOCK-OUT RULE+ GAP FILLERS
1. Using article 7(1) of CISG- applying principal of GF
v. Some courts still use last shot doctrine-minority view??
5. Brand - Professional Responsibility In a Transactional Transactions Practice
i. A lawyer dealing w/ international transactions must have the “legal knowledge, skill, thoroughness and preparation
reasonably necessary for the representation”
ii. A lawyer has duty to determine:
a. Whether two or more countries involved are K’g states to the Sales Convention, and
b. If 1 country is a party to Sales Convention, whether that country has filed an Art. 95 opt-out
iii. If the representation is in the context of litigation, the layer clearly has an obligation to know:
a. Whether the convention applies to the transaction in question
b. If it does, the impact on his or her client of application of convention rules
6. Perillo - UNIDROIT PRINCIPLES
i. Differs from CISG in 3 ways:
a. Broader in scope
b. Principles is a better, more mature product
c. Principles is not intended for adoption as a treat or as a uniform law
1. It is like a restatement
ii. Principles help avoid deadlock if parties cant agree on choice of law
a. Could be a supplement for decisions under other international agreements such as CISG
iii. Battle of the Forms
a. Has 3 sections
1. Deals w/ additional or different terms in a “custom-made acceptance
2. Use of pre-printed standard form as an acceptance of the other party’s standard form
3. Written confirmations
b. Applies the Knock-out rule
7. Bonell - The CISG, European K Law & The Development of a World K Law
i. UNIDROIT still used as reference rather than governing law
ii. As far as court proceedings are concerned, UNIDROIT principles can bind the parties only to the extent that they do
not affect the mandatory provisions of the lex Kus
iii. UNIDROIT principles have been applied to 3 categories:
a. (1) Decisions - applied as the law governing the substance of the dispute
b. (2) Group of decisions - used to interpret or supplement international uniform law instruments
c. (3) Category of decisions - referred to in applying a particular domestic law
8. Folsom - IBTs In a Nutshell
C. How can Clients Avoid This Problem? (Stansbury stated)
1. Before you go into a market, perhaps the best advice you can give your client is to research
2. If you are the seller, you will always want to get rid of consequential damages (clause limiting these)
i. will want to define consequential damages; also, exclude loss of profits and indirect damages
IV. 4.2: Commercial Terms, bills of Lading and Insurance-Books to Bath- Client is a publisher who drafted Ks to ship book
overseas to two different distributors. 1) BILL- Price: FOB Savannah, governed by INTERCOMS…2) HOWARD- Price: CIF,
Bath, United Kingdom, governed by INTERCOMS
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A. PART A - The Role of Commercial Terms
1. Schmitthoff - Export Trade: The Law & Practice of Int’l Trade
i. UCC 2-319
a. The term FOB at a names place, even though used only in connection w/ the stated price, is a delivery term
under which:
1. When the term is FOB the place of ship’t, the seller must at that place ship the goods and bear the expense
and risk of putting them into the possession of the carrier OR
2. When the term is FOB the place of destination, the seller must at his own expense and risk transport the
goods to that place and there tender delivery of them
3. Where under either (a) or (b) the term is also FOB vessel, car or other vehicle, the seller must in addition at
his own expense and risk load the goods on board
● If the term is FOB vessel the buyer must name the vessel and in an appropriate case the seller must
comply w/ the provisions of this article on the form of bill of lading
ii. 3 Types of FOB clauses
a. Strict or classic FOB K
1. Buyer must nominate suitable ship
2. When it arrives the seller places goods on board under K of carriage by sea which he has made w/ carrier
● Marine insurance normally arranged by the buyer directly
b. FOB K w/ additional services
1. Ship’g & insurance arrangements are made by seller, but is done for the account of buyer
● Buyer not under obligation to nominate a suitable ship
c. FOB K (buyer K’g w/ carrier)- usually for large int’l companies
1. Buyer himself enters into a K of carriage by sea directly or through an agent (a forwarder)
2. BoL goes directly to the buyer, usually through an agent of the buyer in the port of ship’t, such as a freight
forwarder, and does not pass through the seller’s hands.
2. FOLSOM - Principles of IBTs
i. Incoterms will supersede UCC provisions when it comes to commercial terms
ii. FOB TERM- seller is obligated to deliver goods on board a ship arranged for and named by the buyer at a named
port of ship’t
a. Only for water-borne transportation
b. Seller must bear cost/risk of inland transportation to the named port of ship’t, and loading the goods on ship
c. Seller has duty to notify buyer that goods have been delivered on board
1. Must provide commercial invoice or electronic equivalent
d. Seller must pay any costs of customs formalities and export taxes
e. Seller must provide all customary packaging and working, and pay for checking operations
f. 2 types:
1. FOB Place of Ship’t
2. FOB Place of Destination
iii. CIF TERM- seller is obligated to arrange for both transportation and insurance to a named destination port and then
deliver the goods on board the ship arranged for by the seller
a. Only for water-borne transportation
b. Seller arranges the transportation, pays the freight cost to the destination port
c. Completes delivery obligations when goods are “on board the vessel at the port of ship’t”
d. Seller must pay the freight & unloading costs of carrier at the destination port under CIF term
1. Buyer pays all other costs
e. Seller arranges to pay for insurance during transportation to the port of destination
1. Risk transfer to buyer at the time goods are on board the vessel at port of ship’t
2. Buyer bears risk of damages during transit even though the seller has a duty to procure insurance against
such risks
f. Seller must notify buyer that goods are on board and provide a commercial invoice
iv. Bill of Lading- doc issued by a carrier to a shipper upon receipt of goods from the shipper
a. BoL=
1. The shipper’s K w/ the carrier which sets forth the terms of that K expressly or incorporates a carrier’s
terms and tariffs by reference
2. A K of bailment as a receipt from the carrier to the shipper, and
3. A doc of title-endorsed and negotiated
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b. 2 types of BoL -
1. “Straight” or non-negotiable
● Receipt for the goods, and serves as a K w/ the carrier stating the terms and conditions of carriage
- Issued to a named person, the consignee
2. “Order” or negotiable
● Serves as a:
- K w/ the carrier
- Receipt for the goods, and
- A doc of title for the goods
● Issued to a named person “or order”
- Allows the names person to indorse the bill of lading to “order” delivery of the goods to others.
● If possession of BoL is transferred to 3rd party, and BoL is indorsed to that 3rd party by the payee or a
“holder, then 3rd party becomes “holder of BoL
- Possession of BoL, properly indorsed, confers rights over the goods
- Forgery of the payee’s or holder’s signature is NOT effective as an indorsement
3. Waybills
● Ship’g goods under a non-negotiable receipt known as a linear waybill
- Not a doc of title
- Just conveys info
- May be transmitted electronically
- Hague/Visby Rules
c. Other differences in the BoL
1. “On board” or “Loaded”
● BoL issued once goods have been loaded on board the vessel
2. “Clean” BoL
● One that has no clause or notation on the face of the bill indicating visible or possible defects in the
packaging or condition of the goods
3. Multimodal BoL
● When carrier agrees to transport and deliver goods to their final destination using connecting carriers
such as rail, truck, and air…
FOB CIF
Goods + delivery to point
Costs covered by price terms? Goods + freight + insurance
of ship’t
When must buyer pay? Depends b/c it is negotiated Upon receipt of BoL
To what point must S deliver goods? On board at place of ship’t
General approach - has
B’s inspection rights? Inspect docs (NOT goods) before pmt
right to inspect
Risk of loss pass? When goods are on board
Title pass? Goods delivered to place of ship’t
Responsible for import/export Buyer = import
license? Seller = export
3. Zwilling - Update of Important Commercial Terms: Revision of INCOTERMS as of 2011
i. Incoterms not designed to supplant domestic law, but rather to bridge the conflicts that arise for the parties from the
K law rules of the different domestic legal systems
ii. 2 broad categories
a. Those limited to sea and inland waterway transport
1. CIF and FOB
b. Those allowed for any mode of transport
1. More prevalent for air, land, and rail
● CIP- carriage and insurance paid
● CPT- Carriage paid to
● DAP- Delivered at place
● DAT-delivered at Terminal
● DDP-delivered duty paid
● EXW- Ex Works
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● FCA- Free Carrier
iii. Electronic Commerce
a. New rules expressly endorse the substitution of paper communications w/ an “equivalent electronic record or
procedure”
iv. Incoterms may be used in domestic and international trade
a. PAGES 100-107 in Textbook
4. International Chamber Of Commerce, INCOTERMS In Practice
i. For seller to perform, K must provide buyer w/ continuous documentary cover against the carrier
a. Seller must provide buyer w/ a doc which gives the buyer a K enforceable by him against the carrier
b. Cover afforded to the buyer by the K of carriage must contain no gaps
ii. Pmts against Docs Transaction
5. Ramberg - ICC Guide to INCOTERMS 2010
i. Seller’s duty to provide proof of delivery and the transport document
a. A8- must be formal proof that seller fulfilled delivery obligation (except for EXW)
ii. Surrender of original BoL essential
a. Under no circumstances should the goods be delivered except in return for an original BoL
iii. Non-Negotiable transport documents
a. Waybill system
1. Transaction w/o LoC (Stansbury stated: this type is common b/t established buyer & seller relationship =
trust; or small transaction)
iv. Pmt against sea waybills req’s caution
a. It is necessary that the original instructions from the seller to the carrier to deliver the goods to the names
consignee be irrevocable
v. Problems of replacing BoL by EDI
a. Difficult to replace BoL b/c it is not only proof of the delivery of the goods to carrier but also legal symBoL that
BoL represents the goods
vi. The Incoterms rules VFR and VIF and EDI
B. PART B - The Basics of Carrier Liability
1. Tetley - Marine Cargo Claims
i. Regulation of the terms of a BoL, or the relationship b/t a carrier and its customers, is the subject of 3 international
conventions
ii. The Hague Rules (MAJORITY)-adopted in 1924
a. Sets forth rules governing ship-owner liability to shippers for cargo loss and damage
1. 17 defenses against carrier and ship-owner liability
2. Preclude K’lly exculpatory clauses in BoL
3. Limit liability to a minimum of $500/package or customary freight unit
iii. The Hague/Visby Rules (MAJORITY)-adopted in 1968 (amended the Hague rule)
iv. Hamburg Rules (about 32 countries total)- Not really important
v. Most countries apply the Hague/Visby rules inbound and outbound
a. USA applies COGSA (pretty much the Hague rules) in the same way
b. If you invoke the Hague rules:
1. Must contain the clause stating that you apple these rules, and even if you don’t state them, it still applies
vi. B/c carrier is obliged to state the marks and # or the quantity or the weight of goods
a. They must inspect goods upon receiving them
1. Reasonable inspection
b. In order to avoid being bound by the description of the goods on the BoL, carrier often will add clauses such as
1. “Shipper load and count” or “particulars furnished by the shipper”
vii. Harter Act (USA)-prohibits and nullifies language in a BoL that limits a carrier’s liability for
a. Negligence, fault, or failure to proper loading, stowage, custody, care or proper delivery of any and all lawful
merchandise or property committed to its or their charge
2. N. HORN - The Transactional Law of Int’l Commercial Transactions
i. Various systems of national law essential consist of two types of legal rules:
a. Mandatory - must be accepted by the person affected by them, whether they like them or not
b. Optional - can be accepted or not; they may be modified or adapted to suit their convenience
ii. Interest of the state which determines whether a particular rule shall be mandatory or optional
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3.Berisford Metals Corp. V. S/S Salvador- π appeals an order and judgment that granted motion for summary judgment
against SS Salvador for loss of 70 bundles of tin ingots valued at about 400K. The DC also limited ∆s’’ liability to $500
per bundle, or a total of 35K.
i. ISSUE- whether a carrier that issues a clean on board BoL erroneously stating that certain goods have been received
on board when they have not been so loaded should be precluded from limiting its liability pursuant to an agreement
binding the parties to the $500 limit of COGSA
a. HOLD- when a carrier misrepresents its own conduct in loading goods aboard ship it is responsible for the
misrepresentation and may not invoke K provisions incorporating COGSA’s limitations on liability
1. Issued false BoL -that it loaded 100 bundles when it really loaded 30
2. Carrier responsible for verifying the contents before loading the containers and issuing a clean on board
BoL -especially after they were in an overnight gov’t-controlled storage
V. 4.5: The Bill of Lading: Computers to Caracas- SA is broker for computers to sell outside US. Campeador had need of 100
computers (El Cid). SA decided to ship some conforming and some non-conforming goods.
A. Forged Indorsements and Misdelivery
1. Hual As V. Expert Concrete, Inc- J Ks to sell 4 pumps. E paid for 3 of 4 pumps via LoC (couldn’t finance 4th). Upon
ship’t, carrier H issued separate order BoL for 4th pump, which J retained pending full pmt, by E. Upon arrival, E
presented to H’s local representative various documentation, but not the order BoL for the 4th pump. H’s representative
released all 4 pumps. J sues H, and H sues E.
i. HOLD- where Misdelivery occurs when the carrier is to deliver goods to a purchaser who presents a negotiable BoL
and the carrier delivers the goods w/o req’g purchaser of such goods to hand over the negotiable bill, the carrier is
absolutely liable.
2. Edelweiss Inc V. Vengroff- π sold frozen poultry to purchaser in Russia, and arranged to have it transported in 3 ship’ts
from USA to Russia via OOOCLL. Upon delivery of poultry to OOCLL ships, OOCLL tendered P an original BoL in
triplicate for each of the three ship’ts (2 non-neg, and 1 neg). π never received pmt for the poultry from the purchasers
and consequently did not tender a BoL to them wrt the ship’ts. Nevertheless, w/o receiving BoL from Russian
purchasers, OOCLL released 3 ship’ts
i. HOLD- Π entitled to SJ as to liability in regards to the negotiable BoL.
a. The non-negotiable BoL could not be won
3. Adel Precision Products Corp. V. Grand Trunk Western- P sold farm machinery to Hickman from his place in Cali to
MI. Evidence before the ct. showed that carrier issued a uniform order BoL for the machinery to the order of Adel and
sent the original to Hickman (buyer). Bottom line, the BoL was forged. Adel sued carrier, but not Hickman.
i. HOLD- Federal Bill of Lading Act § 8
a. A carrier, in the absence of some lawful excuse, is bound to deliver goods upon a demand made either by the
consignee names in the bill for the goods or, if the bill is an order bill, by the holder thereof, if such a demand is
accompanied by-
1. An offer in GF to satisfy the carrier’s lawful lien upon the goods;
2. Possession of the bill of lading and an offer in GF to surrender, properly indorsed, the bill which
issued for the goods, if the bill is an order bill; and
3. A readiness and willingness to sign, when the goods are delivered, an acknowledgment that they have been
delivered, if the carrier requests such signature.
ii. BoL must be properly indorsed, forgery is unacceptable
iii. Carriers fault for sending the original BoL to the buyer
a. (Stansbury stated) carrier can call the seller’s # that is on every BoL to reassure themselves that the indorsement
is valid
B. PART B - Misdescription and Disclaimers of Description
1. Tetley- Carrier’s duties
i. Must inspect the goods upon receiving them
a. Need not be an expert
ii. The Hague Rules 3(4)- a clean BoL only creates a prima facie presumption that the goods are as described on the
BoL
a. Estoppel has prevented a carrier from proving that the goods were other than as described against a third party
holder of the BoL for value who is acting in GF
iii. UK COGSA- provides a rule of estoppel in respect to the quantity of the goods ship’d on board
a. Estoppel is against only the master or “other person signing the “BoL”
iv. Pomerene Bills of Lading Act- provides similar estoppel but
a. It is against the “carrier”
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b. Is not merely for quantity, but for the description in the BoL
c. The date of ship’t
d. Is in favor of the owner of the goods under a non-negotiable BoL or the holder of an order bill for value in GF
who relied on the description or the date of ship’t as shown on the bill
v. Carrier who packs a container is bound by description on the BoL of the # of packages in the container or their
weight
vi. When carrier receives container packed & sealed by shipper, only a rebuttable presumption arises
a. Rebuttable presumption that the goods as described on the BoL (including # of packages or weight mentioned)
were received by the carrier
b. Presumption becomes irrebuttable when BoL is transferred to a 3rd party holder in GF
c. Carrier should try to protect itself from 3rd parties by adding:
1. “Shipper load and count”
● Shipper is obliged to prove that each package listed on the BoL was actually sowed in the container
2. “Said to contain”
3. ”Container sealed by shipper”
vii. If carrier receives a container packed by the shipper, in order to avoid liability for non-receipt or misdescription of
the goods, carrier should add
viii. If carrier is unable to inspect before ship’t, should note it on the BoL by such words as “shipper’s load and count,
container sealed by shipper”
2. Jain Irrigation System, Ltd. V. Chemcolit, Inc- P seeks to recover for a Misdescription of the goods that they
purchased. P purchased 700 metric tons of SPVC from D. D K’d w/ Ocean Knight for ship’g to transport from Texas to
India. D stuffed, sealed, and locked the containers. Ocean issued to D BoL, which recited that the containers were “said
to contain”, followed by descriptions that were provided to Ocean by D. Containers arrive in India sealed but when
opened, were found to be completely wrong and not what was represented in BoL. P alleges Ocean liable for damages
resulting from Misdescription of goods on the BoL.
i. ISSUE-is Ocean liable when the BoL uses phrase “said to contain”?
a. HOLD- the Pomerene Act applies to all bills of lading issued by a common carrier for the transportation of
goods from a place in the US.
1. A common carrier that issues a BoL is not liable for the Misdescription of goods when
● The goods are loaded by the shipper
● The BoL is qualified by the phrase “said to contain” and
● The carrier does not know whether any part of the goods was received or conform to the description
b. OCEAN NOT LIABLE
3. Industria Nacioinal Del Papel Ca V. Mv Albert F- Industria ordered 1500 metric tons of soft wood from Sanca Steel.
The cargo was loaded on the MV Albert in southern Florida. When the MV arrived in the Dominican, it was w/o the
cargo specified on the BoL. The cargo was completely worthless
i. ISSUE- whether a vessel may be held liable in rem for non-delivery of its cargo described in a clean on board BoL
a. HOLD- YES-Pomerene Act Applies
1. Carrier issuing a BoL will be liable to holder of an order bill, who has given value in GF, relying upon the
description therein of the goods, for damages caused by the nonreceipt by the carrier of all or part of the
goods upon or prior to the date therein shown, or their failure to correspond to their description thereof in
the bill at the time of its issue
● Here goods did not conform to what was on the BoL
4. Distribuidora Internacional Alimentos V. Amcar Forwarding Inc- π hired Amcar to load & transport merchandise
from Miami to Guatemala. Amcar issued BoL detailing amt of merchandise in ship’t, loaded merchandise into
containers, and arranged for transportation. π alleges the BoL contained inaccurate info, leading to seizing by
Guatemalan customs, delaying delivery by several months
i. ISSUE- whether Amcar is liable even though they wrote “shipper’s load and count” on BoL’s face
a. HOLD- Amcar cannot escape liability merely by inserting those words.
1. When goods are loaded by a common carrier, is case here, carrier is responsible for verifying quantity of
goods described on BoL matches what’s actually loaded for transit
C. PART C - Forged Bills of Lading
1. POWLES (MARITIME FRAUD)-
i. Non-ship’t of the goods
a. BoL used for documentary fraud
1. Sell goods represented by a BoL which is forged on a standard form
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ii. Short Ship’t of Goods
a. False BoL showing the incorrect quantity ship’d
2. Tc Ziraat Bankasi V. Standard Chartered Bank- Only thing important here is UCC 7-507 and 7-508:
i. 7-507-
a. Where a person negotiates or transfers a doc of title for value otherwise than as a mere intermediary under the
next following section, then unless otherwise agreed he warrants to his immediate purchaser only in addition to
any warranty made in selling the goods
1. That the doc is genuine; and
2. That he has no knowledge of any fact which would impair its validity or worth; and
3. That his negotiation or transfer is rightful and fully effective wrt the title to the doc and the goods it
represents
ii. 7-508-
a. A mere intermediary warrants only its own GF and authority to transfer the document, as set forth in UCC 7-
580:
1. A collecting bank or other intermediary known to be entrusted w/ docs on behalf of another or w/ collection
of a draft or other claim against delivery of docs warrants by such delivery of the docs only its own GF and
authority. This rule applies even though the intermediary has purchased or made advances against the claim
or draft to be collected
CH. 5: FINANCING THE INTERNATIONAL SALE OF GOODS

I. 5.0: Introduction-Letters of Credit
A. Buyer who has arranged the issuance of a letter of credit has 4 different categories of potential problems:
1. Possibility that buyer’s bank will pay when the docs are not those specified by the LoC
2. Possibility that buyer’s bank may refuse to pay when the docs do conform to the LoC
3. Parties may get into an argument about whether the docs conform or not
4. Buyer’s bank may know that the seller has breached the sales K by ship’g non conforming goods (under conforming
documents) before it pays against the documents
B. Key Terms
1. Applicant= Buyer
2. Beneficiary=Seller
3. Issuing Bank= Buyer’s Bank
4. Confirming Bank=Seller’s Bank
C. All of the obligations of all of the parties must be measured by the docs tendered, and must not encompass anything outside
the “four corners” of the documents.
D. Folsom- IBTs In a Nutshell
1. Different types of LoC
i. Irrevocable v. Revocable
ii. Sight v. Time
a. Sight- payable on demand
b. Time- in the future
iii. General v. Special
a. General- does not restrict beneficiary’s right to transfer its rights
b. Special- limits permissible transferees
iv. Fixed
a. If LoC can become “exhausted” either when drafts for pmt have been drawn by beneficiary for the full amt of
the letter or when the time period for drawing upon the letter has expired
2. Back-to Back Credit- lets brokers finance its purchase of goods from supplier w/ credit of its buyer
3. Transferable LoC- one that expressly states it can be transferred by original beneficiary to 3rd parties
4. Revolving LoC- clean sight letters which work in the same way and are subject to the same legal rules for fixed LoC
II. 5.1: The Letter of Credit and Electronic Communication: Gold Watch Pens for France-BNP opened a documentary credit in
favor of beneficiary, Shady in Jersey, by sending an inter-bank message via SWIFT system to Metrobank in NY. Metro needs to
advise the beneficiary and confirm credit. Shady appeared at Metro HQ and presented all docs req’d by LoC. Several errors:
goods were wrong, not proper working order, no original commercial invoice. BNP rejected.
A. Since BNP are paying against documents, it should be clear that the docs offered by Shady must conform strictly to the LoC
K
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B. Pietrzak - Sloping In the Right Direction: A First Look At the UCP 600 & The New Standards as Applied to Voest-
Alpine
1. Background
i. Neutral party, such as bank, substitutes its creditworthiness for that of buyer-assures timely pmt of any amt. owed
under K to seller
a. Contains - party names, pmt amts, expiration date, description of merchandise, specifies documents, specifies
special conditions and instructions.
2. Basics of Commercial LoC
i. 3 separate transactions
a. The underlying K b/w buyer and seller for the purchase and sale of goods
1. Must indicate what law will govern LoC transactions>UCP most likely
b. The agreement b/w issuer and its customer; and
1. Typically bank has relationship w/ buyer and secures partial pmt and a commission before drafting LoC
2. Copy of LoC sent to beneficiary directly or through “intermediary” bank
c. The bank’s obligation to pay the seller under the LoC itself
1. Document presentation is the most important stage of the LoC transaction
2. Banks must adhere to a strict compliance standard when checking documents
3. Fundamental Principles of LoC
i. Principle of independence- establishes that each K is completely independent of the next
ii. Principle of compliance dictates that docs presented to bank must comply w/ LoC req’ts.
4. Laws Governing the Commercial LoC
i. UCC article 5
ii. UCP 600- created by the International Chamber of Commerce (ICC)
a. Rules based on internationally accepted banking practices regulating issuance & use of LoC
C. Jh Rayner And Co. V. Hambros Bank Ltd- D bank received instruction to open irrevocable sight credit in favor of P. Aarhus
was selling groundnuts. P presented D w/ a draft, which was refused on the ground that the terms of the LoC and BoL did not
match.
1. HOLD- there is no room for docs which are almost the same, or which will do just as well.
i. “Almost the same” will not do, and Banks shouldn’t have to know or have special knowledge of these things
a. Ex: difference b/t nuts
D. Adodo - Conformity of Presentation Docs & Rejection Notice: In LoC Litigation: Tale of 2 Doctrines
1. Issues regarding presentation of docs by beneficiary, and whether or not they conform and banks pay
2. The Nature of Strict Compliance
i. Earlier part of 20th century- if presentation of docs do not strictly comply w/ the stipulations in LoC, bank not
obligated to pay
ii. UCP-500- banks must examine all presentation docs to determine whether they conform
a. Reasonably knowledgeable and diligent bank docs checker
b. Exercise of commercial common sense on a case-by-case basis
E. Voest-Alpine Trading Usa Corp. V Bank Of China- Voest entered in a K w/ JFTC to sell them 1000 metric tons of styrene
monomer at 1.2M. JFTC applied for LoC thru Bank of China. Several issues were noted that prompted Bank of China to
w/hold pmt. Parties here expressly adopt UCP 500. Voest believes the 6 discrepancies are mere technicalities/typographical
errors that do not warrant rejection. They were:
1. Beneficiary’s name differed from the name listed in the LoC
i. LoC w/ inverted name clearly bore obvious links to docs presented
2. Voest had submitted bills of lading marked “duplicate” and “triplicate” instead of “original”
i. Neither the LoC nor any provision in UCP req’s that it must all be stamped “original”
3. The invoice, packing list and certificate of origin were not marked “original”
i. Docs were clearly originals on their face
4. The date of the survey report was later than that of the BoL
i. Date does not pose a discrepancy
5. LoC # in the beneficiary’s certified copy of the fax was incorrect
i. 7 other pieces of doc was correct, this was clearly a simple error
6. Destination was not listed correctly in the certificate of origin and the beneficiary’s certificate, as noted by the presenting
bank.
a. Other info in the doc was correct
ii. Court finds in favor of the π
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a. UCP 500 does not mandate that the docs be a mirror image-no strict compliance
b. HOLD- Here, analyzed under this standard of determining whether the whole of the docs obviously relate to the
transaction on their face, which they do.
7. The UCP 600 rejects the strict compliance test and supports compliance under a rational link test as applied in VOEST
i. UCP embraces the case-by-case approach, permitting minor deviations and adopting the position taken by the court
in VOEST
a. Apply reasonable doc checker standard
8. THE UCP 600 Clarifies the Rules Governing Dishonor
i. UCP 600 article 14(b) will permit a bank a maximum of 5 rather than 7 banking days following the day of
presentation to determine if a presentation is complying
ii. The words “reasonable time” & “not to exceed” have been entirely eliminated from UCP 600 Art.
iii. UCP art. 16(b) makes clear that when a bank determines that a presentation does not comply and requests a waiver
from the applicant, this does not extend the period mentioned in article 14(b)
9. Waiver and Notice of Dishonour Rules are Clear and Unambiguous under UCP 600
i. When a bank decides to refuse to honor or negotiate, it must give a single notice to the presenter (UCP 600). It must
also state that the bank is:
a. Holding the docs pending instructions from the applicant
b. Holding the docs until it receives a waiver from the applicant and agrees to accept it
c. Returning the docs OR
d. Acting in accordance w/ instructions previously received from the applicant
III. 5.2: Enjoining Pmt of Letters of Credit For Fraud: Tablets From China-Clint has signed a K to buy 1,000 tablets in working
condition w/ standard manufacturer’s warranty from Robin Hood, a Shanghai based company. Hood is ship’g it CIF San
Francisco. K req’s irrevocable LoC. Little’s friend says that Hood sells tables that are inoperable junk…
A. Focus of Consideration:
1. Fraud X-Cardozo Dissent
i. Dissents from view that if issuing bank chooses to investigate and discovers that the merchandise tendered is not
what was described in the documents, that they may be forced by the delinquent seller to make pmt of the price
irrespective of its knowledge
a. Banks may enjoin
b. This went against the GR that a breach of the sales K did not create a breach of the LoC K, as long as the docs
in fact conform
2. Sztejn Test- Where the seller’s fraud has been called to the bank’s attention before the drafts and docs have been
presented for pmt, the principle of the “independence of the bank’s obligation under the LoC” should not be extended to
protect the unscrupulous seller
i. Used Cardozo’s concept and stated:
a. To permit issuance of an injunction against pmt against docs under a LoC, or presentment of the draft +
accompanying docs under the LoC, where the buyer alleged, not merely breach of warranty, but intentional
fraud and the party presenting the draft was also a party to the fraud
ii. Under this test:
a. Issuer must know it was false
b. Only issuer knew of the fraud at issue
3. 2 competing principles-
i. Independence Principle-expedite for trade
a. Fraud X
b. Underlying purpose is to incite banks to expedite trade in the end
ii. Discourage Fraudulent behavior
4. UCP is silent on this matter
i. Courts have generally held that the UCC provisions govern as “gap-filling provisions”
a. UCC 5-109-if it appears on its face to strictly comply, bank should be OK.
1. innocent bank= OK to pay
2. can seek (TRO) if you have a forged doc., a materially fraudulent doc,
B. Mid-America Tire Inc V. Ptz Trading (270)- SC of Ohio held 4 things:
1. The UCP did not displace the UCC’s provisions on fraud;
2. The fraud provisions of the UCC applied to both fraud in the LoC transaction and fraud in the underlying sales
transaction;
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3. That the necessary “material fraud” req’d that the fraud “vitiate the transaction”, making the letter of credit a “vehicle for
fraud,” and depriving the applicant of the benefits of the underlying K; and
4. fraudulent acts of agents of the beneficiary must be considered by the courts
C. Dolan - Tethering the Fraud Inquiry In LoC Law
1. Both law and commerce generally treat independent obligations as “pay now, argue later” devices and dependent
obligations as “argue now, pay later” devices
2. The Fraud X to the independence principle
i. The fraud X destroys the independence of the bank guarantee and the LoC rendering them secondary obligations
ii. CL courts have implemented rules to narrow it so it is not destructive
iii. A mere claim of fraud is not sufficient
iv. UK v. UCC
a. UK- tethered the fraud rule by limiting it to cases in which the beneficiary of the credit and not some 3 rd party
has practiced the fraud
b. USA- fraud must be “material”
3. The Locus of fraud and Its Relationship to the Underlying Transaction
i. UCC
a. makes it clear that fraud inquiry may proceed into the underlying transaction
b. beneficiary does not need to be involved in the forged or fraudulent docs to be able to make a claim
ii. English Rule
a. Party seeking to stop pmt must est. irrefutable fraud
b. If fraud in the underlying transaction or presented docs → applicant can stop, but beneficiary must be involved
iii. Reason for the difference b/t the 2 is the independence principle
a. English rule - stricter
b. Can a claim be enjoined? Under UCC & English Rule
UNDER UCC
Fraud/Forgery in LoC Docs Fraud in the UT
Beneficiary involved Yes Yes
Beneficiary NOT involved Yes No
UNDER ENGLISH RULE
Beneficiary involved Yes Yes
Beneficiary NOT involved No No
D. Montrod Ltd V. Grundkotter (283) - G was beneficiary, and M was applicant (buyers). M, thru a subsidiary, bought 400 amt
of frozen pork sides. They issued a LoC thru Fibi Bank. Sellers bank was SCB (confirming). G presented docs to SCB,
including an inspection certificate “signed” by M, which on their face complied w/ the terms of credit. SCB paid credit on
that assertion. Judge found inspection certificate had been signed w/o authority of M & said G not fraudulent. M claiming
“nullity” or non-conforming doc
1. HOLD- there can be no nullity X
i. If party wishes to est a demand is fraudulent it must place before the bank clear & obvious fraud
a. Here there was no fraud (bottom left square of table above)
1. Issuing bank is not obliged to question/investigate the genuineness of docs which appear on their face to be
docs the nature and content of which comply w/ the req’t of the credit
b. Adding a nullity clause would make it even more difficult for banks
ii. Ct applied English Rule b/c no US party (thus, no UCC) and UCP does not discuss fraud
iii. If the basis of a fraud X is that the court will only intervene in breach of the autonomy principle for the purpose of
preventing or discouraging the perpetration of fraud on the part of the beneficiary or other presenting party → is a
clear extension to hold that presentation of a doc which is itself a nullity for reasons which are not known to the
beneficiary or issuing bank at the time of presentation, are none the less to be similarly treated
E. Banco Santander Sa V. Banque Paribas (286) - Banque issued a deferred pmt LoC (one not req’g the use of negotiable
drafts) in favor of Bayfern. Bayfern approaches Santander offering a receivable discount for their LoC to be bought.
Santander agrees and purchases the LoC for $19.5 million. Bayfern informs Santander that the docs were fraudulent.
1. Beneficiary knows → Santander gets stuck w/ worthless LoC.
2. Santander took shortcuts and should have:
i. Requested to examine the docs
ii. Sent docs to Banque to see if it all checked out w/ them
F. GAO- Any of the following shall be considered as LoC fraud in China:
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1. The beneficiary has forged docs or presented docs containing fraudulent info;
2. The beneficiary has intentionally failed to deliver goods or delivered goods w/ no value;
3. The beneficiary has conspired w/ the applicant or a third party and presented fraudulent docs whereas there is no actual
underlying transaction; or
4. Other circumstances that constitute LoC fraud
IV. 5.3: Standby Letters of Credit: Electronics to Israel- Israel K’d w/ SpaceCom to carry out the design and construction of a
modern ground-to-air communication system for the IAF. SC was req’d to send an irrevocable LoC in Israel’s favor, which gave
Israel the right to draw on this LoC upon presentation of a sight draft, and Israel’s own “certification that it is entitled to the amt
covered by such draft by reason of a clear and substantial breach.” Israel drew on this.
A. FOCUS AND CONSIDERATION
1. Here, the LoC is issued by the seller’s bank and runs in favor of the buyer
2. Standby LoC is used as a guarantee or a performance bond, or as insurance of the seller’s performance
i. Obligation of a standby LoC arises from docs showing that the principal has failed to perform
ii. Beneficiary may draw only after the customer defaults on the underlying K
iii. Tough for contractor to get an injunction
a. Must show manifest abuse
3. 5 legal regimes that apply to standby LoC
i. Laws:
a. (1) UCP
b. (2) UCC Art. 5
ii. ICC Publications:
a. (3) UN Convention on Independent Guarantees and Standby LoC
b. (4) Uniform Rules for Demand Guarantees (URDG)
c. (5) International Standby Practices (ISP)
B. Blau - Banks Guarantees To Pay Upon First Written Demand In German Courts
1. Definition- abstract promissory notes of a bank to apply w/i a very short period of time, (48 hours), if formalized
conditions are fulfilled
i. written demand of beneficiary of a guarantee
a. an additional statement
2. Guarantees are similar to documentary LoC, except instead of bank examining documents, all that needs to be reviewed
is unilateral statement of beneficiary
i. Bank obligates itself to pay in event a beneficiary requests pmt-stating that work performed by contractor was
delayed (contractor must reimburse bank)
3. Deterring Abuse- Test
i. Evidentiary Standard- clear showing by documentary evidence
a. more than affidavits/witness testimony
C. Goode - Abstract Pmt Undertakings In International Transactions
1. Demand guarantees vs. Documentary credits
i. DG - almost used exclusively to secure the performance of a non-monetary obligation (typically the execution of
construction works or the delivery of conforming goods under a K of sale - default mechanism)
a. bank will be called upon to pay when things go wrong
b. improper for the beneficiary to call the guarantee if he does not honestly believe that the principal has
committed a breach of underlying K
1. underlying transaction - more important here
2. in order to get paid, need to give bank an assertion that seller did not perform
● less than needed for documentary credits
c. problem of unfair or abusive calls is unique to DGs
d. able to make “extend or pay” demands
ii. DC - designed to ensure the discharge of a pmt obligation
a. bank will pay when things go right
b. involves presentation of substantial amt of docs
iii. Both DG & DC:
a. are abstract pmt undertakings, insulated from the underlying trade transaction
D. Turner- United Nations Convention on International Standby Letters of Credit
1. not a mandatory convention
i. only applicable to “international undertaking”
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2. Article 4(1)- LoC is international if place of business of any two of the following parties to credit transaction are in
different countries
i. issuer
ii. beneficiary
iii. applicant
3. Parties can determine which law to use- if not, law of jurisdiction where credit is issued
4. parties may opt out of the convention
5. Article 5 supplements the Convention and will govern wrt matters not covered by convention
i. EXAM TIP- if one party is American, you probably can discuss the UCC
6. Fraud by the convention is covered by Articles 19 and 20
i. They apply when:
a. a doc is not genuine or has been falsified,
b. no pmt is due “ on the basis asserted”, or
c. the demand “has no conceivable basis.”
ii. Article 5 uses terms “fraudulent” and “forged” but does not define them
iii. in absence of a convention rule on point → look to UCC gap-fillers
E. Turner II- Rules for Standby LoC using the International Standby Practices
1. if you incorporate the International Standby Practices (ISP) in LoC, it will replace ICC’s UCP
2. Commercial credit vs. Standby LoC
i. Commercial credit - typically supports the applicant’s obligation as a purchaser in a sale of goods
ii. Standby LoC - supports the applicant’s obligation to pay a loan or similar monetary obligation
3. Exclusions from coverage of ISP that are left to the applicable jurisdictional law
i. Questions of capacity (who may issue a standby LoC)
ii. Formal req’ts (such as whether the issuer’s undertaking must be contained in a written doc)
iii. Issue of fraud
4. ISP Rule 4.02 - issuer or nominated person is req’d to examine docs for inconsistency w/ each other only to the extent
provided in the standby
5. UCP - does not directly address the problem of how to measure the compliance of the presented docs w/ the req’ts of the
credit
i. Art. 13(a) - examining bank applies international standard banking practice to determine if presented docs comply
→ strict compliance
a. Strict compliance is not the same as mirror image
b. typographical, spelling errors, and other trivial differences does not render it noncompliant
F. Kelly - International Measures to Prohibit Fraudulent Calls on Demand Guarantees & Standby LoC
1. Seeking solution to problems caused by unfair or fraudulent calls on DG’s and SLC’s
i. 4 relevant instruments:
a. International Chamber of Commerce (ICC) Uniform Rules for K guarantees
b. ICC uniform rules for demand guarantees
c. ISP 98
d. United Nations Convention on Independent Guarantees and SLC’s
2. Uniform Customs and Practice for Documentary Credits
i. UCP600- contains no provisions preventing unfair/fraudulent calls on commercial or standby LoC
3. Uniform Rules for Demand Guarantees
i. URDG- similar to UCP 600 in that it remains silent regarding the fraud issue
a. tries to strike balance b/t interest of beneficiaries to receive speedy pmt, and that of principals to avoid the risk
of unfair calling by beneficiaries
b. Article 20
1. req’s beneficiary, when demanding pmt, to stipulate in writing both that there is:
● breach of K
● what type of breach involved
c. Article 21
1. guarantor shall transmit beneficiary’s demand and any related docs to principal
● allows principal a change for rebuttal
4. International Standby Practices (ISP98)
i. Rule 1.05(c)-
a. leave issue of fraud or abusive demands to be determined by applicable jurisdictional law
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ii.Rule 4.08-
a. even if a SLC does not specify any req’d doc, it will still be deemed to req a documentary demand for pmt.
5. Fraud and the Convention
i. Article 19 ( See above under Turner I)
a. fraud must be “manifest and clear” and “immediately available”
b. 2 aspects of article 19 that depart clearly from the principle of autonomy
1. in determining whether a call is justified guarantor/issuer of demand guarantee/SLC req’d to look to
underlying K for good cause to pay
2. constant insistence of on the exercise of GF (article 15(3)) puts beneficiary and the guarantor on notice that
pmt needs to be justifiable by good cause
c. Allows guarantor/issuer basis for refusing pmt as well as court measures against fraudulent beneficiary
G. American Bell Int’l v. Islamic Republic of Iran (318) & Archer Daniels Midland (ADM) v. JP Morgan Chase Bank (324)
1. BoP is very high to get an injunction
2. Caulfield Test
i. Must be a showing of irreparable injury and either:
a. probable success on the merits, or
b. sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of
hardships tipping decidedly toward the party requesting the preliminary relief
H. Kimball- Preventing Wrongful Pmt of Guaranty LoC
1. Detailed doc req’t
i. state w/ specificity the breach
ii. Ask that you only pay after award either through arbitration or judgment
iii. certificate from 3rd party of a breach
iv. set milestones to reduce amt of standby LoC
v. End date and or release on cancellation or completion
2. Alternatives
i. Standby LoC
ii. Performance bonds
iii. Sureties
iv. other types of insurance policies
CH. 6: TARIFF AND NON-TARIFF IMPORT BARRIERS

I. 6.1: The World trade Organization: Oxicorp Trades w/ Non Market and Transition Economies: Oxi is a US corp that
specializes in trade w/ countries possessing NME’s. Free market principles are taking over, and NME nations are becoming hard
to find. Now they are moving on to transition economies (examples are Russia and China). What is general risk of trading in
NME and TE countries?
A. Focus of Consideration
1. Focusing on
i. MFN- Most favored Nation
a. best available import rates- tariff levels are set for particular products and it is the same for most of these
nations
ii. DSU- Dispute Settlement Understanding
a. The WTO agreements
B. Demeret - Metamorphoses of the GATT: From the Havana Charter to the WTO
1. General Agreement on Tariffs and Trade (GATT) signed in 1947 at Geneva and was not meant to stay in force, but only
as a temporary provisional agreement until Havana Charter entered into force
i. US did not ratify the Havana Charter
2. 4 Xs to MFN (meaning you can offer lower rates):
i. (1) Trade unions
a. e.g. EU & NAFTA
ii. (2) Equal domestic treatment
a. internal taxes, trade regulations and standards
iii. (3) Anti-dumping & countervailing duties
a. Anti-dumping - selling below cost to gain the market
b. Countervailing duties - anything that goes against WTO rules set in place (especially improper gov’t subsidies)
iv. Quantitative restrictions
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a. e.g. primarily quotas
b. prohibited w/ the X of measures which are justified in order to protect the balance of pmts b/t the 2 parties
(nations)
3. Tokyo Round and the GATT “a la carte”
i. Single package system - a state wishing to become a member of WTO must agree to all of the multilateral
agreements negotiated w/i the framework of the Uruguay Round
ii. Uruguay Round puts an end to the GATT’s “a la carte”
a. 4 Xs to MFN (derogation):
1. (1) Gov’t procurement - b/c of national security
2. (2) Trade in civil aircraft - b/c national security and national industries (self interest)
3. (3) Dairy sector - b/c self interest and PSP standards
4. (4) Bovine meat sector - b/c self interest and PSP standards
C. Bhala- An Essay on China’s WTO Accession Saga
1. Accession is a 2-step process
i. (1) Applicant must negotiate bilateral concession agreements w/ each WTO member that asks for one
a. members that request are referred to as “accession working party”
ii. (2) The negotiation of a protocol of accession w/ all WTO members, i.e., w/ WTO as a whole (Terms of Entry)-
a. current law/ policies
b. bilateral agreements- scheduled commitments
c. indicate and determine status from least developed to developed
D. Folsom- Practitioner Treatise on Int’l Business Transactions (TEST MATERIAL)
1. There are 5 stages in the resolution of disputes under WTO:
i. Consultation;
a. WTO members believes other members not in conformity w/ covered agreements- they can call for
consultations on those measures
1. respondent has 10 days to reply to the call for consultations
● must agree to enter into consultation w/in 30 days
2. Once consultation begin, parties have 60 days to achieve a settlement
ii. Panel Establishment, investigation and report;
a. If consultations fail, complainant may request DSB to establish a panel to investigate, report and resolve dispute
1. DSB must establish panel upon request unless denied by consensus
2. Panels comprised of 3 individuals from a list who are not citizens of either party
● if agreed they can have a panel of 5
● could also agree to appoint citizens of a party to panel
3. Panelists may be either non governmental individuals or government officials- independence is ensured
4. Parties cannot oppose nominations, except for compelling reasons
5. Complaints brought to panels involve either:
● violations of covered agreements or
● non violation nullification and impairment of benefits under the covered agreements
6. Panels receive pleadings and rebuttals and hear oral arguments
● can engage in fact development from sources outside those presented by parties
● panel can establish group of experts
7. Panel is obligated to produce two written reports
● Interim- apprize parties of panel’s current analysis of issues and permits parties to comment on
analysis
● Final- must be submitted to DSM w/i 6 mo. of its establishment
- contain findings of fact, findings of law, decision and rationale
iii. Appellate Review of the panel report;
a. Can be requested by any party, unless DSB rejects
b. no threshold req’t
c. Limited to issues of law or legal interpretation
iv. Adoption of the panel and appellate decision; and
a. Rubber stamp-appellate body determinations are submitted to the DSB
v. Implementation of the decision adopted
a. 3 step implementation system
1. Violating member has 15 mo. to bring measures into conformity w/ WTO obligations
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2. Parties negotiate to reach an agreement upon a form of compensation
3. Retaliation- if parties cannot agree on compensation w/i 20 days
● Complaint seeks authority to suspend some of its WTO obligations in regard to the respondent
- retaliation must be w/i same sector and agreement as violating measure
● DSB must grant complainant’s request to retaliate w/in 30 days unless all WTO members reject
- responding WTO member may challenge assertion of noncompliance
- challenge ordinarily heard by original panel- must be resolved w/i 90 days
II. 6.3: Nontariff Trade Barriers: Shrimp From India & Beef From Europe: Louisiana Shrimpers is association of shrimp
industry companies. New law under ESA req US shrimpers to use “trawler or turtle elimination devices.” LS contests these
regulations but lost. They went to congress. Shrimp from uncertified harvesting nations cannot be imported into the US. Foreign
and US shrimpers asserted US breach of GATT obligations. United Ranchers want to know if there is anything they can do to
make Europe adhere in a way that at long last opens up their market to hormone treated US beef. Another issue was the US ban
on the importation of all British Beef during the wake of mad cow disease. The British filed a complaint w/ the WTO
1. Multilateral GATT negotiations have led to a significant decline in world tariff levies.
2. Non-trade barriers (NTBs)
i. e.g. health & safety regs, environmental laws, rules reg’g product standard, customs procedure
3. Part A - looks at extraterritorial jurisdiction
4. Part B - looks at US-European nontariff trade barriers
III. PART A - Environmental/Conservation Laws as NTBs
A. Wirth - Role of Science in the Uruguay Round & NAFTA Trade Disciplines
1. national measures directed at preservation of the environment and protection of public health are subject to the generic
req’ts of GATT
2. GATT Art. XX - provides 2 Xs from the General Agreement for specific categories of national measures: (are narrowly
construed)
i. (1) measures necessary to protect human, animal or plant life or health
a. a test that turns on the trade effect of the measure
ii. (2) measures relating to the conservation of exhaustible natural resources if such measures are made effectively in
conjunction w/ restrictions on domestic product or consumption
a. req’s that the standards in question are primarily aimed at conservation
B. Dunhoff - Institutional Misfits: The GATT, the ICJ & Trade-Environment Issues
1. Thai Cigarette Panel declared a measure is “necessary” only if an alternative measure which it could reasonably be
expected to employ & is not inconsistent w/ other GATT provisions is available to it
i. no GATT panel has req’d that the proposed alternative measure be as effective as the measure actually employed
C. WTO Appellate Body - US v. India, Malaysia, Pakistan & Thailand
1. Standard at issue: cannot import shrimp unless you are certified
2. 4 Issues court looks at in Art. XX(g) § 609 (Analysis):
i. (1) Exhaustible natural resource? Yes
a. “natural resources” is not static in its content or reference, but is evolutionary
b. sea turtles were “exhaustible” as they were listed on the Convention on International Trade In Endangered
Species list
ii. (2) Primarily related to conservation? Yes
a. treaty interpreter looks into the relationship b/t the measure at state and the legitimate policy of conserving
exhaustible natural resources
iii. (3) Measures also apply to domestic producers? Yes
iv. (4) How does it comport w/ “Chapeau” of the Introduction?
a. 2 basic prohibitions:
1. Arbitrary or unjustified restriction
2. Disguised restriction of international trade
3. Unjustifiable discrimination & arbitrary discrimination
i. US made all the decisions and did not take into consideration any policy and/or measure that the exporting countries
may have
ii. did not consider any alternatives prior to passing the law
a. there were viable alternatives
iii. inflexible regime (not as it was written, but how it was applied/enforced)
4. Result: US brought it into compliance (#1 remedy)
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IV. PART B - Public Health Regulations as NTBs
A. WTO Appellate Body- EC Measures Concerning Meat & Meat Products (Hormones)
1. Standard at issue: prevented growth-hormone
2. 1st general issue: allocation of the BoP in proceedings under the SPS Agreement
i. Initial burden - on complaining party
a. must establish a prima facie case of inconsistency w/ a particular provision of the SPS Agreement w/ the SPS
measures complained of
ii. Once prima facie case is made → burden shifts to the defending party to counter or refute the claimed inconsistency
3. Panel proceeds to make a general, unqualified, interpretive ruling that the SPS agreement allocates the “evidentiary
burden” to the member imposing an SPS measure
4. Standard of review applicable in proceedings under the SPS agreement = objective assessment of the matter, including
facts and the applicability of and conformity w/ the relevant covered agreements
5. Precautionary Principle - allows for countries to develop a standard for their citizens
i. has not been written into the SPS Agreement as a ground for justifying SPS measures that are otherwise inconsistent
w/ the obligations of members in particular provisions of the Agreement
ii. panel should remember that responsible, representative gov’ts commonly act from perspectives of prudence &
precaution where risk of irreversible, life-terminating, damage to human health are concerned
iii. precautionary principle does not, by itself, w/o clear textual directive to that effect, relieve a panel from the duty of
applying the normal principles of treaty interpretation in reading the provisions of the SPS Agreement
6. SPS Agreement Articles:
i. 3.1 - measure that is based on the existing relevant international standard (can chose to do this)
ii. 3.2 - measure conforms to international standards
iii. 3.3 - measure can have a higher standard than that in the international standard
a. req’s 2 things:
1. (1) Scientific basis
2. (2) Can justify the higher standard by the 8 subsections of Art. 5:
● appropriate to circumstances
● scientific evidence available
● relevant economic factors
● minimize trade effects
● avoid arbitrary and unjustified
● ensure measures are no more trade-restrictive than req’d
● if scientific evidence is insufficient, gather more info
● if reason to believe they over extended or constrained trade, can be asked to provide basis for such
measure
V. 6.6: K Preferences for Local Producers: Cross-border Procurement of Photocopies: Photocop is a NY corp. which produces
machines. All materials and technology to make them are derived from US sources. Photocop wishes to sell to governments, but
there are competitors. It will depend on a variety of laws establishing preferences in gov’t procurement for local producers.
VI. PART A: BUY AMERICAN PROCUREMENT
1. WTO Procurement Cod expands coverage to include procurement of services, construction, gov’t-owned utilities and
some state & local (sub central) Ks.
2. NAFTA also establishes procurement regulations
i. 50K for goods and services provided to federal agencies
ii. > 250K for government owned enterprises
iii. >6.5M for construction
3. US- CANADA agreement
i. opens government procurement to US and Canadian suppliers on Ks as small as 25K.
a. However- goods supplied must have at least 50% US and Canadian content
B. The Trade Act of 1979
1. US gets publicity based on the Buy-American Act
i. other countries get the same negative publicity through different means
a. single tender procedures- one supplier is contacted for procurement
b. limited publicity on public offers;
c. req’ts that bidders must have an established branch w/in the country; and
d. vesting of broad discretion in procurement officers to ignore foreign bids
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2. Pro-national policies interfere w/ theory of competitive advantage-ASK
C. Federal Limitations on State “Buy American” Laws
1. Congressional sentiment favored protection of US labor & manufacturing to greatest extent possible
i. Bills limiting purchases of foreign products by federal government
ii. 20 states have no explicit “buy American” policy
a. the remaining have a flexible approach
iii. several states prohibit gov’t purchases of specific products when products are of foreign origin
D. Crosby v. National Foreign Trade Council
1. Issue: whether Burma law of Mass., restricting authority of its agencies to purchase goods or services from companies
doing business w/ Burma, is invalid under Supremacy Clause of the constitution
i. YES- the gov’t said the Mass. Law is too much and conflicts w/ congressional law
a. supremacy law overrules here in this conflict
1. leave it to the president
E. KSB v. North Jersey
1. Issue here was regarding “buy American” statutes, which req use in government purchase Ks of materials produced in
this country. A jersey water supply commission contained such provisions, creating a dispute w/ West German
manufacturer of pumps and equipment. Π argued NJ provisions impermissible intrusion by state into field of foreign
affairs, an area reserved to Congress and Pres
i. Law here was flexible enough so as to not conflict w/ trade- states may properly exercise their police powers and in
doing so have some permissible effect on foreign trade
a. Comment- Domestic bids considered unreasonable if exceed foreign bid by:
1. 6% (customs duties included) or 10% (customs duties and specified costs excluded)
2. 12% labor surplus area
3. 50% DOD
F. Allis-Chalmers Corp. v Friedkin
1. Issue: whether a K for construction of the hydroelectric power plant was awarded to ∆-intervenor Hitachi America in
violation of Buy American act?
i. Principal of the act is to protect domestic labor, and here, they were using domestic labor which fulfills the main
principal
VII. PART B - GATT/WTO & Gov’t Procurement
A. KSB II
1. KEY- Art. III para. 4 of GATT: GATT like a treaty, state laws must yield when it is inconsistent w/ or impairs the policy
or provisions of treaty.
i. NJ buy American in direct conflict w/ GATT:
a. “The provisions of this article shall not apply to laws, regulations or req’ts governing the procurement by
governmental agencies of products purchased for governmental purposes and not w/ a view to commercial
resale or w/ a view to use in the production of goods for commercial sale”
b. the commission has urged that materials to be acquired in connection w/ the construction of its proposed water
treatment plant fall w/in the X clause:
ii. Exclusionary requisites are: (1) procurement by governmental agency, (2) of a product, (3) purchased for
governmental purposes, (4) not for commercial sale, and (5) not w/ a view to use in the production of goods for
commercial sale.
VIII. (Stansbury stated) if you see a law that has an extraterritorial effect → need to think about WTO/GATT
CH. 7: RESPONSES OF DOMESTIC PRODUCERS TO IMPORT COMPETITION

I. 7.0: The Framework For Providing Protection From Import Competition
A. Introduction
1. This chapter considers circumstances in which raising tariffs and trade barriers is expressly authorized in order to protect
domestic industries from competition abroad.
2. 3 circumstances where it’s ok to deviate from MFN:
i. Dumping
a. selling for less than the market price (fair price) in its home country, in another country
1. gov’t must show:
● dumping takes places
● calculate degree/extent of dumping
- Cost in export market
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- amt charged by exporter in another country
- cost + expenses +normal profit= fair amt
● injury or threat of injury- detailed investigation
- material injury
- end if insignificantly small> < 2% of the export price of the product OR < 3% of total imports of
that product
b. Remedies
1. anti-dumping duties
● WTO- as mentioned directly above
● GATT- charging extra import duty on the particular product from particular exporting country
2. cease and desist
ii. Subsidies/Countervailing measures
a. 2 categories of subsidies:
1. Prohibited- req recipients to meet certain export targets, or to use domestic goods instead of imported
goods
● distorts int’l trade
2. Actionable- complaining country has to show that the subsidy has an adverse effect on its interests
b. Remedies-
1. w/draw subsidy or impose countervailing duty
2. penalties similar to anti-dumping
iii. Emergency Measures
a. Here we must show “serious” injury
1. restrict imports of a product if its domestic industry is injured or threatened w/ injury cause by a surge in
imports
3. Procedures and US Law
i. Principal agencies involved in AD/CVD cases are the International Trade Administration (ITA)- part of the
commerce department
a. mission is to foster, promote, and develop US participation in world trade
b. the what, where, how, and when of imports/exports
ii. US International Trade Commission (ITC)- independent bipartisan agency created by congress
a. involved in safeguards or escape clause proceedings
b. created to provide trade expertise to both Congress and the Executive
c. carries out reports and investigations- asks: does domestic suffer?
1. “escape clause” import relief for domestic industry cases
iii. Admin. decisions made by the above agencies are subject to review by the US Court of International Trade (CIT)
a. decisions can be appealed to US Court of Appeals
4. International Tribunals
i. CANADA/MEXICO> binational panel under NAFTA
ii. WTO- Dispute Settlement Body (DSB)- 2 basic remedies
a. monetary compensation
b. retaliatory trade sanctions
II. 7.1: Subsidies and Countervailing Duties: Tires from Canada: US Rubber (client) is concerned about tire plant constructed by
Michelin Canada. Pissed at amt of assistance various Canadian gov’t bodies have given to Michelin, inducing them to set up in
Can. instead of US. They get special grants, tax breaks, and loans. Majority of the tires are expected to be exported to US. All
these breaks are said to reduce Michelin’s per unit cost by about 7% when compared to producing in normal situation. Petition
filed w/ ITA-reasonable indication of injury
1. In the Uruguay Round Agreement Act, the US amended its CVD law to conform w/ the Agreement on Subsidies and
Countervailing Measures (SCM Agreement)
i. SCM is under the WTO
2. CVDs are used to offset a subsidy of a foreign state
3. 19 USC § 1671 imposes 2 administrative conditions on the creation of CVDs:
i. (1) Secretary of Commerce (acting thru International Trade Administration) must determine that a country is
providing a subsidy to its exporters
ii. (2) International Trade Commission must determine that imports benefiting from the subsidy injure, threaten to
injure, or retard the establishment of a domestic industry
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4.§ 1671 does not define “subsidy”
5.Countervailable subsidy
i. defined in §1677(5): as a subsidy that is “specific”
ii. includes both of these types:
a. Export subsidies - all of these are classified as “specific” and therefore countervailable
b. Domestic subsidies - for these to be countervailable, must be found to be “specific” under one of the test in §
1677(5A)(D)
6. 3 separate issues for analysis in any CVD proceeding:
i. (1) Is there a subsidy?
ii. (2) Is there an injury?
iii. (3) What procedure to apply to the application of countervailing duties?
a. depends on forum (e.g. US, NAFTA, WTO, etc.)
B. Young - US Trade Law & Policy
1. Export subsidies - benefits bestowed by a gov’t on an industry or exporter for the products that are exported abroad.
i. Amt is directly tied to amt of goods that are exported
2. Domestic - benefit bestowed by a gov’t on the company (or industry) more generally
i. is not linked to the amt of the company’s product that is exported
3. Economic Rationale
i. Export -
a. may distort the optimal allocation of resources by encouraging more investment in export oriented activities
than is warranted by the market demand
ii. Domestic -
a. may distort optimal resources allocation
b. may discourage imports b/c they permit domestic producers to sell at a price below what they would otherwise
sell for
iii. however, some argue that subsidies merely correct for market failures
4. Political Rationale
i. the world trading community generally concludes that export subsidies are often problematic
a. parties may seek relief from export subsidies via the WTO
ii. However, the US continues to maintain and apply domestic countervailing duty laws against subsidized goods that
have made their way into their markets (based on notions of fairness)
C. Enrenhaft - “Remedies” Against Unfair International Trade Practices
1. what is “unfair” differs internationally than it does nationally
2. “Subsidy” (WTO Agreement on Subsidies and countervailing Duties (Subsidies Code) & US law) req’s a showing of the
following elements:
i. (1) Subsidy
ii. (2) Specific
a. Specificity (Targeting)
1. Direct - relates to export performance
● more common for developing countries
2. Indirect - domestic subsidy that indirectly supports exports
iii. (3) Granted by authority
a. Financial contribution
1. $
2. foregoing revenues/tax incentive
3. goods or services for free
b. Income price support
c. Quasi-gov’t agency providing $
1. like Crown Corp. in Hypo (IEL)
iv. (4) Confers a benefit
a. defined: something they cannot get in the market place
3. Factors considered in determining whether de facto specificity exist when de jure specificity does not:
i. (1) Use of a subsidy program by a limited # of enterprises or industries
ii. (2) Predominant use by certain enterprises or industries
iii. (3) Grant of disproportionately large amounts to certain enterprises or industries
iv. (4) Manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy
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4. North American Free Trade Agreement (NAFTA)
i. does not compare to international standards
ii. NAFTA’s antidumping/CVD dispute resolution panels apply domestic law of the country imposing the duty
challenged
iii. NAFTA panel review is optional
iv. findings remanded to administrative authority being reviewed
v. final/no appeal
vi. precedent?
a. CIT = no
b. Binational panels = maybe
D. Zheng - The Pitfalls of the (Perfect) Market Benchmark: The Case of Countervailing Duty Law
1. SCM Agreement Art. 14’s 4 guidelines for benefits a recipient receives from a subsidy:
i. (1) When determining whether gov’t-provided equity confers a benefit → criterion is whether the gov’t provision of
equity is “inconsistent w/ the usual investment practice of private investors”
ii. (2) When determining whether a gov’t-provided loan confers a benefit → criterion is the borrowing firm pays the
same amt on the gov’t loan as it “would pay on a comparable commercial loan which the firm could actually obtain
on the market”
iii. (3) When determining whether a gov’t-provided loan guarantee confers a benefit → criterion is whether the firm
receiving the gov’t guarantee pays the same amt on the gov’t guarantee as it “would pay on a comparable
commercial loan absent the gov’t guarantee
iv. (4) When determining whether the gov’t provision (or purchase) of goods or services confers a benefit → criterion is
whether the gov’t provision (or purchase) is made for less than (or more than) “adequate” remuneration
E. Folsom - Principles of IBTs, Trade & Economic Relations
1. US has 2 statutes on countervailing duties: (both found in Tariff Act of 1930)
§ 1671 (MFN List 1) § 1303 (Smoot-Hawley List 2)
other countries that participate in the
For products imported
WTO Subsidies Code (or its other nations
from...
equivalent)
may NOT be w/o a determination that
may be w/o any finding of injury to a
a US industry is “materially” injured,
Imposing duties... domestic industry (unless product
threatened w/ such injury, or its
enters duty free)
development is materially retarded
Must determine... a subsidy + injury only that a subsidy exist
Can it be settled by
can cannot
international agreements?
applied retroactively? only in critical circumstances w/o limitation
2. US implementation of the WTO Subsidies Code - Countervailable Subsidies
i. subsidies complaint can now be brought either in the national forum or the WTO
ii. 2 classes of subsidies:
a. Prohibited (red light) - a subsidy based on export performance
b. Permissible, but actionable if they cause adverse trade effects (yellow light)
1. Hurts 3 identified (from last class, which i missed)
● domestic industry where it is going
● exporters who rivals
● exporter wanting to import into country of origin of export
3. 2 gov’tl agencies involved in regulating through CVD, imports into the US:
i. International Trade Administration (ITA) - part of Commerce Dep’t, thus part of Executive branch
ii. International Trade Commission (ITC) - independent agency
4. If § 1303 governs:
i. petitioners (domestic industry) will favor
ii. proceeding is completely before ITA, ITC is excluded
iii. 2-stage proceeding:
a. (1) ITA preliminary countervailable subsidy determination
b. (2) ITA final countervailable subsidy determination
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5. If § 1671 controls:
i. respondents (the importers) will favor b/c a 4-stage proceeding allowing argument over the alleged domestic
industry injury will follow:
a. (1) ITC preliminary injury determination
b. (2) ITA preliminary countervailable subsidy determination
c. (3) ITA final countervailable subsidy determination
d. (4) ITC final injury determination
6. At the preliminary findings stage:
i. post bond for past sales
ii. start paying CVD for future
7. Tariff Act (not NAFTA) Best info available
i. Dispute process:
a. ITA - claim filed
b. ITA - prima facie case?
c. ITC - injury?
d. ITA/ITC - preliminary findings
1. Respondents are incentivized to cooperate fully by giving info requested by ITA in a case (e.g.
antidumping) b/c if not the ITA can make an adverse inference (Stansbury stated)
e. ITA/ITC - final determinations
f. Appeal to CIT
g. Appeal CIT’s holding to court of appeals federal circuit
h. SCOTUS
III. 7.2: Antidumping Duties: SuperComputers to the US: US firm has developed a new type of supercomputer. CEN & Jujitsu
have very similar supercomputers. AA is in the market for 1 of the new comps. It decided to buy from CEN for 10M. US firm
offered to sell for 17M, and Jujitsu for 9M, but AA rejected both. US firm feels as though CEN cheated but selling price way
below cost. Can US firm seek to have antidumping duties imposed?
1. Dumping- selling goods at “less than fair value”
2. How one determines whether a sale is less than fair value
i. 1673b(b)- comparison of normal value of the goods w/ their export price
ii. definition of normal value and export price in 1677b and a.
3. What is a material injury?
i. 1673(a)(2)
B. US Trade Law and Policy
1. Why GATT considers injurious dumping unfair? undermines operation of free market econ principles
i. Dumping req’s that exporting market be segregated and that the importing market be open> makes int’l trade
fundamentally different to trade w/i an integrated market
ii. operating from segregated market can confer on exporters an advantage not based to higher efficiency> cannot be
matched by competitors in importing country
iii. highly injurious for importing country’s industry
C. Antidumping Manual
1. Import administration- administer the AD and CVD laws to ensure domestic industries are not injured by unfair foreign
competition in the US mkt
i. US AD and CVD laws> Title VII of the Tariff Act of 1930
ii. IA’s AD and CVD determinations are reviewable by 2 fed. Cts of special jurisdiction, the US Court of Int’l trade
and court of appeals for fed Cir.
2. Investigations
i. AD and CVD investigations are initiated in response to petitions filed by an affected US industry. IA may also self
initiate
a. IA issues questionnaires to foreign producers and affiliated importers regarding sales made during 12 mo.
period of investigation
1. specific info about the company’s sales in US
3. The dept. must determine that a minimum percentage of the domestic industry for the like product supports an
antidumping duty petition
i. Petition meets minimum req’ts if domestic producers/workers who support petition account for:
a. at least 25% of the total production of the domestic like product; and
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b. more than 50% of the production of the domestic like product produced by that portion of the industry
expressing support for, or opposition to, the petition.
4. Fair Value Comparisons
i. RULE: Only when the Dept. determines that there are sales at less than fair value (LTFV), accompanied by a
determination of material injury or threat of material injury to domestic industry by the ITC, can antidumping duties
be levied.
ii. Comparison b/t foreign company’s US prices and a Normal value (NV)= dumping “margin”
a. Normal value is derived from one of three sets of data:
1. Home Market Price
2. Third Country Price
3. Constructed Value-
● Comparing foreign firm’s US sales price to the price it charges in other export markets or to the firm’s
cost of producing the merchandise, taking into account the selling, general, and administrative
expenses, and profit
5. Injury Determination
i. Need three things:
a. material injury
1. harm which is not inconsequential, immaterial, or unimportant
b. threatened material injury
c. imports are retarding establishment of the industry (don't worry so much about this)
ii. The ITC must
a. define the relevant domestic like product and domestic industry
1. domestic producers, as a whole, of a domestic like product or those producers whose collective output of
the domestic like product constitutes a major proportion of the total domestic production of that product
b. is industry experiencing or threatened w/ injury?
c. causal link b/t injury and the imports allegedly sold at less-than-fair value
1. very low standard
D. Wooden Bedroom Furniture From China Investigation (Great case for analysis)
1. Here ct determined US was materially injured by imports from China of wooden bedroom furniture
i. Consider these 4 factors in making a determination of injury:
a. Conditions- demand, supply, substitutability
b. Volume of Imports- driven by someone other than domestic?
c. Price Effects of Imports- low cost?
d. Impact- low cost imports reducing profits in the industry?
Ch. 8:Exports
I. Intro:
A. Congress passed 2 bodies of law: (these 2 statutes are broad grants of power to the Pres., stating the types of actions he may
take in furthering stated Congressional purposes)
1. Export Administration Act of 1979 (EAA)
i. For commercial products
ii. Pres. delegates power to Commerce Dep’t
2. Arms Export Control Act (AECA)
i. For “munition items” (military) or dual-use
ii. Pres. delegates power to Secretary of State
B. 2 basic obligations of exporters:
1. Know ultimate end-use
2. Know the customer
C. Apply to:
1. Exports from US
2. US content in product . 10-25%
3. US subsidiary in foreign nation sells to another foreign nation
4. Goods US exports to foreign nation, and that foreign nation sells to another foreign nation (“re-exported)
i. (Stansbury stated) to protect against this → can add a provision in K that prohibits sale to any country not allowed to
be sold to under US law
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ii. Furthermore, can add a provision that req’s them to give you a BoL if re-exported, and so on up to the final
destination
II. 8.1: Export Controls: Roll-On Ball Bearings to Europe and the Middle East: Roll-On is a US Co. that began producing new
“active magnetic” ball bearings. Demand for the revolutionary product has exploded w/ order from all around the world. Co. is
considering affiliating w/ potential foreign distributors in EU. The design and manufacturing process was developed by a college
professor w/ help from his Chinese grad assistant, under a K w/ Roll-On. Ball bearings got in hand of terrorists in Iraq/Syria, even
though never did business there. How do you prevent this?
1. Governmental regulation of exports- administrative regulations
i. trying to find balance of creating effective export controls to protect national security while allowing for the benefits
of increasing nation’s exports
B. US Commerce Dept. Bureau of Industry and Security
1. Bureau of Industry and Security (BIS)- responsible for implementing and enforcing Export Administration Regulation
(EAR)
i. EAR regulates export and re-export of most commercial items
ii. BIS regulates “dual-use” items- ones having both commercial & military or proliferation applications
iii. Mode of transportation is no longer relevant
2. How to determine if you need a commerce export license
i. What are you exporting?
a. Look up yourself, or ask BIS
1. Know whether the item you intend to export has specific Export Control Classification # (ECCN) by using:
● Commerce Control List Categories List
● Five Product Groups List
● EX: 3A981
- 3= systems, equipment and components
- A= electronics
- 981- separate list to look this up
b. If item is not found on Commerce control List = low technology which does not req license
ii. Where are you Exporting?
a. Look to the Commerce Country Chart
1. compare ECCN w/ chart
iii. Who will Receive Your Item?
a. Place of disclosure does not matter (e.g. tour given to German guy in US, while touring)
b. Entity List- specifies the license req. that apply to each listed party
c. Treasury Dept Specially Designated Nationals and Blocked Persons List- a list which administers and
enforces economic and trade sanctions against targeted foreign countries, terrorism sponsoring organizations,
and international narcotics traffickers
d. Unverified List- composed of firms for which BIS was unable to complete an end-use check (RED FLAG).
e. Denied Persons- list of firms/individuals whose export privileges have been denied
iv. Purpose/End-Use? - some end-uses are prohibited while others may req a license
a. If you need a license > look to see if you have any Xs
1. Here, Chinese grad assistant (should question whether a license will be needed to export)
● Is considered an expert (follows nationality) and would need to know if it can be exported to China w/
or w/o a license
3. General Steps for Analysis
i. Which laws apply?
ii. IS product covered under the law?
iii. What is the classification number
iv. License?
v. X?
C. EPCI- Enhanced Proliferation Control Initiative
1. Places its emphasis on exporters’ knowledge about 3 groups:
i. end-user, importer, and end-use (affirmative duty)
III. 8.3: Questionable Pmts to Foreign Officials: Processed Foods in Nigeria: Processed Foods est’d a small cocoa processing
plant in Nigeria. The Gov’t wanted the Co. to offer a minority equity position to Nigerians (under law Nigeria doesn’t allow more
than 49% foreign equity). Processed wined, dined members of gov’t and was exempted from this law. Co. also flew in gov’t
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officials and wives to NYC for a first class visit. Cash pmts often made to Nigerian officials to get priority status to the clearance
of containers for customs. Eventually sales declined and company wanted to close, paid 500K to gov’t for approval of sale to
French buyers.
1. Foreign Corrupt Practices Act- to deal w/ bribes or corrupt pmts
i. Only prohibits “bribes” or pmts mentioned in the act itself
ii. Goal: prohibit pmts that are prohibited by law
iii. 2 questions to think about:
a. For what purpose was the pmt made?
b. What is the magnitude of the effect on the foreign nation caused by the pmts to one of the nation’s officials?
iv. Covers:
a. Issuers (publically traded companies)
b. Officers, directors, stockholders acting on behalf of such issuer
v. SEC- unlawful for an issuer of securities that are registered under SEA, or an issuer that is req’d to file reports, to
make certain pmts to foreign officials or other foreign persons
a. These issuers must maintain accurate financial records
B. PART A- The US Approach
1. Elements of FCPA
i. Issuer not supposed to
ii. Give something of Value
iii. To a foreign official
iv. For purpose of influencing a decision or induce to act or not to act
v. To secure improper advantage; or
vi. Obtaining or retaining business; or
vii. Any 3rd party “knowing that” the above will happen
2. Xs - facilitating/expediting pmt for routine government action > AKA grease pmt
3. Defenses -
i. lawful under foreign officials country, or
ii. if its a reasonable bona fide expenditure (ex: travel, lodging)
4. US v. Liebo- Liebo and another went to Niger offering to make “some gestures” to an air force captain to help get a K
approved. Liebo opened bank account in US in name of captains cousins girlfriend, where he deposited 30K to pay bills
and purchase personal items and gave portion of money to captain. Liebo also paid for cousins honeymoon flight and trip
i. OUTCOME- The company president’s approval of the airline tickets is enough evidence to show that ∆ acted under
his supervisor’s direction and therefore did not act “corruptly”
a. RULE- if your boss tells you to do it, it may be an affirmative defense
5. US v. Kozeny- D and others allegedly violated FCPA by making pmts to Azeri officials to encourage the privatization of
SOCAR and to permit them to participate in the privatization
i. Issue- did he have the requisite knowledge requisite knowledge req’d by the FCPA?
a. YES-such knowledge is established if a person is “aware of a high probability of the existence of such
circumstance, unless the person believes that such circumstance does not exist
6. FCPA of 1988- Clarification or Evisceration
i. Accounting standards implemented to prohibit bribery of foreign officials
a. apply only to issuers registered under the SEA of 34’.
b. Enforcers:
1. SEC has primary responsibility of civil enforcement of FCPA accounting standards, and its penalties
2. DOJ- has both civil & criminal enforcement responsibility for violations of the antibribery provisions by
domestic concerns, and for criminal actions involving issuers
ii. Trade Act makes numerous changes to antibribery provisions: 5 amendments
a. Prohibits giving anything of value to certain persons for the purpose of “influencing any act or decision of such
person in his official capacity, or inducing such a person to do or omit to do any act in violation of a lawful duty
of such person
b. Business Purpose Test- pmts made to assist in obtaining or retaining business for or w/, or directing business to,
any person
1. Test is not to be narrowly construed
c. Prohibitions “shall not apply to any facilitating or expediting pmts for routine gov’t action by foreign official,
political party, or party official
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d. US law should not prohibit activities permitted under a foreign country’s law
e. Clarifies types of pmts prohibited by FCPA- now “reasonable and bona fide expenditures?”
CH. 10: ESTABLISHING & OPERATING A FOREIGN INVESTMENT

I. 10.0: The Decision and Ways to Invest Abroad - Domestic Goods in France: DGI is a corporation registered in DE, offices in
NYC. It manufactures various items used in household cleaning. Sells throughout US, mainly to large distributors. Company now
has goal of to begin manufacturing abroad and w/i 5 yrs achieve a goal of 15% of production to be foreign. DGI does a double
invoice (Stansbury stated: as a lawyer, do not want to hear your client say this). We are hired to help establish first overseas
investments in EU. Laws of foreign investment are at issue here.
A. PART A - How Does a Foreign Direct Investment (FDI) Differ From a Domestic Investment?
1. Difference b/t operating abroad as opposed to in the U.S.
i. Currency
ii. Labor law
iii. Culture
iv. Legal system
v. Economic stability
vi. Compliance laws
vii. Taxation
viii. Repatriation issues
ix. Operational codes
x. Health & safety/Environmental
xi. Different trade associations
xii. Security (physical/personal)
xiii. Investment/Incentive laws
B. PART B - What Nation Will Govern the Foreign Investment?
1. What nations laws will govern? 3 choices
i. (1) Home nation
a. Tax laws, custom provisions, FCPA, anti-boycott laws, anti-trust laws, federal securities law
1. These have extraterritorial application
ii. (2) Host nation
a. Foreign investment laws, all local laws
iii. (3) Multinational Organization/Treaties
a. WTO, NAFTA, EU, etc.
C. PART C - The Operational Code Or The Unwritten Law Governing Foreign Investment
1. Unwritten law where no law covers that specific aspect
2. Laws that are written and exist, but not followed
D. PART D - Where to Establish the Foreign Investment?
1. Placing a foreign investment in a market-economy-developed nation usually means facing fewer problems or at least
fewer problems compared to transitioning nations
2. “Greenfields” investments - incentives given to new investments, usually not for acquiring a local co.
E. PART E - Restrictions Upon The Establishment Of The Foreign Investment
1. Joint ventures - may be req’d for security purposes
2. Restrictions upon entry
i. Usually comes in 2 forms:
a. Restrict the maximum equity allowed to foreign ownership
b. Limit the foreign management or control to a minority interest
3. Restrictions to entry
i. Tend to come in 2 forms:
a. Nations which recognize the corporate form sometimes restrict the maximum equity allowed to foreign
ownership
4. Customs expectation
i. cultural protection
5. Some nations restrict acquisitions of domestic companies by foreign corporations
F. PART F - Foreign Investment By Acquisition Or Greenfields
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Greenfields Acquisition
+ It’s yours - no adaptations needed/systems/processes + Less time consuming

+ Don’t need to find an acquisition + Already established = track record
+ No anti-trust issues + Established reputation, brand recognition
+ Gov’t incentives + Acquire labor force (may be negative)
- No brand recognition (may be the most important factor - May be anti-trust issues
to businessmen) - Litigation that was already started
- Time consuming - Tax legacies
- Need to hire people
- Early deficit operations
G. PART G - Branch or Subsidiary?
Branch Subsidiary
+ Easy ++ Limited liability

+ No independent juridical status (abide by home nation law) - Formed under local law
+ Legally, just an extension of parent company - Control issues (board of
+ Can deduct losses director req’ts; to whom
- Host might tax everything (parent co.) fiduciary duties are owed)
- Parent company liability
H. PART H - Joint Venture Or Wholly Owned?
1. Don’t do joint venture unless forced to or if it is a friendly one
I. PART J - Financing The Foreign Investment
1. US bank
2. Foreign bank
3. Bond issue
4. Cash on hand
5. International development bank
J. PART K - Restrictions On Operations
1. Regulatory harassment
2. Problems repatriating/obtaining “hard” currency
3. Local content, labor or technology rules
4. Labor rules
i. Works council, short work weeks, long vacations, hard to fire, easy to strike
K. PART L - Affect Of A Different Currency
1. Differences b/t the 2 currencies
i. Stable?
ii. Exchange rate fluctuations
a. **hedge**
L. PART M - Transfer Pricing
1. Defined - sales b/t related companies
2. Why do companies sometimes fiddle w/ the transfer price?
i. Impacts amt of taxes to be paid
ii. Some companies raise cost of services to subsidiary than others in the market
a. Comes back to parent company
M. PART N - Termination Of The Operation
1. Always consider the exit
II. 10.1: Choices Upon The Formation Of The Foreign Investment: Member State Company Or A Societas Europaea,
“Greenfields” Or Acquisition, Merger Or Privatization: Domestic Goods Invest In Europe: DGI has decided to invest in
EU. They have decided to establish at least one manufacturing plant on the continent. Management believes the most favorable
location would be Germany. It would prefer to incorporate under laws most favorable to management. They will also establish
factory in the Eastern European nation of Eastvia. UK Law or German law? How will it work? DGI will probably establish
foreign subsidiary DGInt.
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A. PART A - Choosing The Location Of The European Investment: State Of Incorporation Or Location Of The Management
Seat; And Introducing The Societas Europaea
1. Uberseering BV v. Nordic Construction Co. Baumanagement (926)
i. Nordic raises defense that Uberseering cannot sue b/c Uberseering does not have a German entity. Uberseering
moving its management to Germany
ii. Germany has 2 approaches to where a company is located
a. (1) Company Seat Principle - not where you are incorporated, but where you actually are operating from
b. (2) Place of Incorporation - (US & UK rule)
iii. EC Art. 43 - freedom of establishment
a. If already incorporated in another member state, can move management and still have standing
iv. EC Art. 48 - non-discrimination
a. One EU member is to be treated as other EU members
1. Cannot prevent them
v. Codetermination - workers rights to participate in management
a. Directly conflicted w/ 43 & 48
2. Comment On The European Union Societas Europaea & Societas Privata Europaea
i. SE = Societas Europaea
a. EE involvement depends on how the company was formed
b. where EE involvement in management was not present when an SE was formed → such participation would not
be req’d
c. where such participation did exist before an SE was established → there would have to be participation
consistent w/ national practices
ii. SPE = Societas Privata Europaea
a. if there is a cross border merger → SPE is designed to protect pre-existing rights if the registered office is
changed
iii. Advising client: do not do SPE b/c then you have to do worker protections
B. PART B - Acquisition Of A European Union Business By Merger
1. Ralph - European Union Law In A Nutshell
i. Duty to notify
a. applies w/i 1 week of any of the 3 events:
1. signing of a community dimension merger agreement
2. acquisition of a controlling interest
3. announcement of a takeover bid
b. what triggers notification in a deal?
1. when the concentration involves enterprises w/ a combined worldwide turnover of at least 5 billion ECUs
and 2 of them have an aggregate regional turnover of 250 million ECUs
● unless each enterprises achieves more than ⅔ of its aggregate community-wide turnover w/i one and
the same member state
2. GR - “concentrations” meeting these criteria → cannot be put into effect and fall exclusively w/i
commissions domain
c. time restrictions on commission = normally have 4 months to challenge or approve a merger
1. 1 month to make initial decision to investigate
d. Xs that allow national authorities to challenge some mergers:
1. ⅔ of the activities of each of the companies involved take place in the same member state
2. national/public security
3. banks
4. media
ii. Test for anti-competitive behavior in M&As (2-part)(EU’s Test)
a. mergers that significantly impede effective competition
b. by creating or strengthening dominant positions
iii. US standard:
a. substantial lessening of competition (more objective)
iv. Comment on Mergers and Acquisitions in the EU
a. Lisbon Treaty of 2009 (Treaty on the Functioning of the EU)
1. Art. 101 & 102 = foundations for regulating mergers
2. Covers 3 types of acquisitions:
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● (1) proposed acquisition of a member state company by another member state company
● (2) proposed merger b/t a member state company and a non-member state company
● (3) proposed merger b/t 2 non-member state companies (via effects theory)
3. Factors considered by the Commission:
● need to maintain and develop effective competition w/i the common market in view of the structure of
all the markets concerned and the actual or potential competition from undertakings located either w/i
or w/o the community
● market positions of the undertakings concerned and their economic and financial power, the
alternatives available to suppliers and users, their access to supplies or markets, any legal or other
barriers to entry, supply and demand trends for relevant goods and services, the interests of the
intermediate and ultimate consumers, and the development of technical and economic progress
provided that it is to consumers’ advantage and does not form an obstacle to competition
● concentration which would not significantly impede effective competition in the common market or in
a substantial part of it, in particular as a result of creation or strengthening of dominant position, shall
be declared compatible w/ common market
● concentration which would significantly impede effective competition, in the common market or in a
substantial part of it, in particular as a result of creation or strengthening of dominant position, shall be
declared incompatible w/ common market
4. Merger types:
● Horizontal - (competitors) b/t 2 companies that produce largely same/similar products
- most common & competitive
● Vertical - b/t buyers and suppliers
● Conglomerate - essentially all others
v. Aerospatiale-Alenia/de Havilland (938)
a. EU court did not approve the acquisition (not based on competition) b/c it would make Co. A and all the others
have to work harder against Co. B
vi. Boeing/McDonnell Douglas (938)
a. Neither were member states of the EU
b. US said it would be good; EU said bad
c. Commissions description does not discuss competition that much
1. Airbuses market share stayed the same
2. Ability to discriminate against McDonnell Douglass customers
3. Ability to discriminate against suppliers
● did not say that they did, just ability to
vii. Kraft Foods/Cadbury (944)
a. Court did not mention competition either; more political
C. PART C - Worker Participation In The EU
1. Summers - Worker Participation In The US & West Germany: A Comparative Study From An American
Perspective
i. 4 levels of participation in which workers have a voice in the decisions affecting their working life
a. Gov’tl level (highest)
1. via labor unions
2. less centralized/effective in Germany, than in US
b. Industry level
c. Enterprise level
1. harder to impact in the US
2. Codetermination Acts come in
d. Plant or Shop level
2. Wiedemann - Codetermination By Workers In German Enterprises
i. European Works Council (EWC) primary focuses are:
a. Social matters
b. Personnel matters
c. Business modification
III. 10.2: Issues Confronting the Established Investment - Currency Controls, Transfer Pricing & Insolvency: Domestic
Goods, Inc. Five Yrs Later: DGI has subsidiaries in several nations. They currently face issues in Latina, where the government
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is corrupt. People have been w/drawing hard currency from their accounts. There is fear that government may freeze accounts,
and convert dollars to pesos. DGI also facing issues in Rinisia. There is an issue w/ the method they use for pricing intracompany
transfers.
A. PART A - Currency Exchange Controls
1. Why currency controls?
i. Not enough forex → cannot afford to pay for:
a. Foreign debts
b. Foreign missions
c. Imports
2. Types of controls: (VERY TESTABLE)
i. (1) Restrictions on foreigners’ access to domestic borrowing, even in local currency
ii. (2) Restrictions on any access to local borrowing of foreign hard currency holdings
a. pretty extreme, but not unusual for a situation such as the hypo where need for forex is severe
iii. (3) Restrictions on access to and transfer of local foreign hard currency holdings
a. traps the money there
iv. (4) Mandated transfers from abroad into the country to obtain approval of investment projects
v. (5) Req’ts that a percentage of borrowing of foreign currencies by a resident be deposited locally
a. aimed at own residents
vi. (6) Req’ts that the proceeds of sales/services abroad be returned to & deposited in local institutions
vii. (7) Req’ts that earnings of residents in foreign currencies be deposited in domestic accounts
a. aimed at own residents
viii. (8) Req’ts that above deposits of foreign hard currencies be converted to domestic currency accounts
a. “The brass knuckle”
b. essentially stealing
ix. (9) Req’ts that a foreign investor’s demands for hard currency be met by hard currency earnings from exports
a. cannot w/draw hard currency unless you can replace w/ hard currency
1. inhibits you from repatriating any hard currency
3. Speech By the President of Latina to the Congress and the Nation
i. Measures designed to have a moralizing effect:
B. PART B - Transfer Pricing
1. Why do companies fiddle w/ transfer pricing?
i. lower taxes
ii. avoid currency restrictions
2. Different b/t avoidance and evasion?
i. evasion = bad
ii. avoidance = okay
3. Who can challenge transfer pricing?
i. IRS/tax authorities
ii. minority SHs of the subsidiary
4. Basic rule for transfer pricing:
i. Arm’s length principle - intracompany transfers be done at arm’s length
5. 26 USC § 482 - Income Taxes - Allocation of Income and Deductions Among Taxpayers
i. Purpose: covers transfer pricing making sure you are not cheating the gov’t
C. PART C - International Insolvency
1. Westbrook - Developments in Transactional Bankruptcy
i. Moratorium
a. a “stay” on creditor action (in US terms)
b. essential to orderly liquidation and successful rehabilitation
c. generally halts lawsuits and other legal actions against the debtor and its property
d. each country has automatic or nearly automatic moratorium procedures in response to a bankruptcy filing
e. ensures court control in each country
f. prevents individual action and promotes consultation and possible agreement among creditors
g. allows time for vital communication b/t the courts involved
ii. Standing/title for liquidator
a. liquidator obtains the right to control the property, subject to applicable law and court order
iii. Information sharing
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a. desirable to have methods of judicial communication not entirely dependent on the parties
b. most countries req extensive disclosures from the debtor
iv. Creditor involvement
a. nearly every country has devices for creditor involvement
b. only difficulty is national treatment
c. few provisions relating to fair representation of foreign interests & communication are found
1. addressed in part by cross-filing & the foreign liquidator’s role as creditor representative
v. Executory Ks
a. challenging to proceed in a way that is reasonably fair, or no more unfair than necessary, to both the other party
of the K and the other creditors of the debtor
vi. Coordinated claims procedures
a. cross-filing permits the liquidator in each proceeding to file in every other proceeding on behalf of all creditors
in the proceeding in which the liquidator was appointed
b. “Marshalling” or “hotchpot” rules limit recovery by a creditor in a given proceeding w/ reference to amts the
creditor has recovered in proceedings in other jurisdictions
vii. Priorities/preferences
a. most systems favor EEs and gov’ts in determining priorities in distributions
b. the details vary greatly and each insolvency system has various categories of creditors that are favored by local
policy
viii. Avoiding powers
a. central concern is development of a rule that is predictable for commercial purposes and yet not readily
manipulable or evadable by unscrupulous debtors and creditors, all while serving the policy functions of
avoidance laws
ix. Discharge
a. Practice tip: need to make sure it is effective in all countries
2. Keenan - Ch. 15: New Chapter to Meet the Growing Need to Regulate Cross-Border Insolvencies
i. 2 main approaches regarding jurisdiction over a debtor & its assets:
a. Universalist - court in the “home” country of the debtor administers, or at least attempts to administer, all of the
debtor’s assets, wherever they may be found, and distributes them according to the substantive law of the
debtor’s home country
b. Territorialist - court of each country administers the assets w/o that country according to their own laws, often
w/o regard to the proceedings in another country involving the same debtor
IV. 10.4: Project Financing - Mogul Liquefies Gas: Mogul has discovered a lot of natural gas on East Coast of Russia. There is a
market for this in Japan, but can only be transported when liquefied. They will need to build a liquification plant in Russia at a
cost of 10B. The collateral, which is available, is prospective pmts by Japanese buyers for the natural gas. Financing is based on
the economics of project itself. Mogul wants to find a “non-recourse financing” setup. Look at relationship b/w mogul, buyers,
construction companies, financiers, and any other people involved. How do we advise?
1. Project financing entail many risks:
i. construction delays, costs overruns, force majeure (provision freeing both parties from liability from circumstances
beyond their control such as acts of god), gov’t interference, insolvency of one of the parties, poor quality or lack of
sufficient gas in the field and market downturns
2. Debt instruments (are supported by collateral) are the building blocks of project financing
3. 5 basic documents:
i. Security & mortgage instruments
ii. Assignments (and consent to assignments)
iii. Real property conveyance instruments
iv. Subordination agreements
v. Depositary, disbursement, fiscal agency or similar lock box type agreements
B. Typical Parties in a Project Finance
1. Project sponsor/owner
2. Lenders
3. contractors
4. Project buyers (Japanese in hypo)
5. Host gov’t
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C. Hoffman - A Practical Guide to Transactional Project Finance: Basic Concepts, Risk Identification, and K’l
Considerations
1. Distinguishing factors of project finance from term lending include:
i. high leverage of project finance debt
ii. reliance on commitments by 3 rd parties for debt repmt in specified contingencies
iii. non recourse treatment of the project finance debt
2. Advantages of project financing
i. (1) Nonrecourse debt financing
a. classic nonrecourse project financing does not impose on the project sponsor any obligation to guarantee repmt
of project debt if project revenues are insufficient to cover principal and interest pmts
b. provides financial independence
c. protection of the sponsor’s general assets
ii. (2) Off-balance-sheet debt treatment
a. a subsidiary that is controlled more than 50% by the parent company → consolidated on a line by line basis w/
the parent
b. otherwise, the equity method of accounting is used → the investments in the subsidiary is shown as a one-line
entry
c. debt in such circumstances is not reported on the parent company financial statement
iii. (3) Highly leveraged debt (a.k.a. the people’s money)
a. ability to finance a project using highly leveraged debt w/o a dilution of existing equity is an objective of
sponsors
iv. (4) Avoidance of restrictive covenants in other transactions
a. sponsors’ existing restrictive covenants from other operations and projects do not typically reach to the project
financing
b. allows sponsors to leverage debt to an extent that may be prohibited under existing agreements
v. (5) Favorable financing terms
a. more attractive interest rates and credit enhancements are available to the project than are available to the
sponsor
vi. (6) Internal capital commitment policies
a. rate of return goals of sponsor for new capital investments make project financing attractive
3. Disadvantages:
i. (1) Competing interests
ii. (2) Higher interest rates than on the direct loans made to the sponsor
iii. (3) Delay due to negotiations
iv. (4) Interest rates are higher than direct loans
v. (5) Expensive D.D.
vi. (6) Higher transaction costs
vii. (7) Supervision by the lender
a. b/c lender has no recourse
D. Blumenthal - Sources of Funds and Risk Management for International Energy Projects
1. 2 types of financing:
i. Private:
a. Commercial financing (e.g. private bank)
b. Consortia of private banks
c. Pension funds
d. Insurance companies
e. 144A private placement
ii. Public: (Stansbury stated: while it sucks using these, may be worth it if there are political risks)
a. Bilateral agencies (e.g. world bank)
b. Regional banks
1. offers protection against local political risks
c. Gov’t grant
E. Fitzgerald - Project Financing Techniques
1. Check out the project:
i. Appraisals
ii. Experts
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iii. Lawyers
2. Lenders likely will req a legal opinion reviewing:
i. (1) Regulatory structure governing the project
ii. (2) Need to obtain gov’tl approvals, licenses, concessions, etc.
iii. (3) Ownership of the project assets
iv. (4) Enforceability of each of the project agreements (over its entire time) and loan docs (including enforceability of
interest and default interest provisions)
v. (5) Enforceability of choice of law and dispute resolution (arbitration) provisions
vi. (6) Enforceability of foreign judgments or arbitral awards
vii. (7) Creation of liens or charges & restrictions on, and costs of, foreclosing the lien created by security docs
viii. (8) Laws or rules giving priority to liens of certain creditors (e.g. tax authorities)
ix. (9) Existence of exchange controls (and need to obtain exchange control approvals), w/holding taxes, or other
charges
x. (10) Registration req’ts that may be imposed on foreign lenders by gov’t/local banking authorities
xi. (11) Restrictions or limits on use of offshore bank accounts (due to currency risks)
xii. (12) Procedures and creditors’ rights following a bankruptcy of the project owner
xiii. (13) Liabilities under local environmental laws
xiv. (14) Liabilities under local labor laws
xv. (15) Restrictions on availability of insurance coverages
xvi. (16) Costs of stamp duties (charge for gov’t agency approval) req’d for documentation, notarial fees or other req’d
pmts to local counsel, recording or registration costs for security documents, and court costs payable in connection
w/ enforcement of the lenders’ rights as creditors
F. Fitzgerald - International Project Financing: An Overview
1. Risks:
i. Currency Risk
a. Inconvertibility of currency
1. look at country’s history or get protection by world bank
b. Transfer risk
1. risk that the central bank of host country will notionally convert borrower’s local currency into forex on its
books, acknowledge the central bank’s forex obligation to the lender, but will not transfer the foreign
exchange out of host country
c. Devaluation risk
1. if a lender lends in forex and relies for repmt on a borrower that generates earnings only in local currency,
there is a risk that the local currency may depreciate in value & that the borrower will be unable to generate
sufficient local currency for conversion into forex to service the debt
2. hardest to manage
ii. Expropriation Risk
a. risk of nationalizing assets
b. can protect by bringing in an international/regional bank
c. greatest in high profile projects that are often associated w/ public ownership (e.g. oil, mining, power projects,
etc.)
iii. Changes in Law/Regulatory Risk
a. host country gov’t taking lawful actions that have consequences of rendering the project unprofitable
1. e.g. import/export restrictions, price controls, or excessive taxation
iv. Political Violence Risk
v. Risks Relating to Available Security for the Loan Under Local Law
a. Civil law countries do not recognize the floating charge → do not provide security over inventory, receivables,
or other movable assets
vi. Risks Associated w/ Foreign Laws & Legal Systems
vii. Performance Risk of Other Parties
2. How to Allocate Currency Risks: (both underwrite risk of inconvertibility & non-transferability)
i. Multilateral sources:
a. Multilateral Investment Guarantee Agency (MIGA)
b. Multilateral “B Loans”
c. World Bank Guarantees
d. Inter-American Development Bank Guarantees
37
ii.Bilateral sources:
a. Overseas Private Investment Corporation (OPIC)
b. Eximbank and Other OECD Export Credit Agencies
3. Risks Relating to Available Security for the Loan Under Local Law
i. Availability of Security
a. CL countries - generally provide for security over all assets - fixed & floating charges are available
b. Civil law countries - generally do not provide for security over inventory and receivables - no floating charge
available
G. Mclaughlin - Representing the Owner at the Project Planning Stage
1. Typical construction risks:
i. (1) Unanticipated subsurface conditions
a. owner typically bears the risk
b. contractor may bear risk for subsurface conditions that vary from those usually encountered in the performance
of its work
ii. (2) Force majeure delays
a. contractor is typically responsible for the risk of delays that are reasonably anticipatable, such as normal
adverse weather
iii. (3) Design errors
a. under CL states, the owner bears the risk of construction delays and costs due to drawing errors and omissions
b. usually the contractor is responsible under the K docs for design errors that the contractor should have
discovered before the start of the work
iv. (4) Material and labor shortages
a. contractor bears the risk of providing sufficient labor and materials to complete the work
b. unless the K docs provide otherwise
v. (5) Price increases
a. allocation of this risk depends on the pricing arrangements
b. if the contractor performs the work on a lump sum basis, the contractor is typically will bear the risk of price
escalation
c. owner will bear the risk under certain cost-plus arrangements
vi. (6) Site security
a. depends on decision about responsibility for policies, security, and insurance of site & prop
vii. (7) Trade contractor defaults
a. general contractor under general K and design-build arrangements
b. under a construction management arrangement, depends on the specific terms of the K
2. Special project risks:
i. (1) Environmental conditions
a. typically on the owner; except to the extent contractor negligently exacerbates the problem
ii. (2) Concealed conditions
a. owner bears risk
iii. (3) On-going operations
a. contractor bears the risk of additional costs to reasonably accommodate the on-going use of the facility if the
contractor is informed, submitting its price quote of the owner’s req’ts to maintain normal operations at the site
and any restrictions on working hours or use of site
iv. (4) Quantities
a. owner typically bears the risk that the actual quantity may differ from the estimated quantity of work if
estimated quantities of work are indicated in the bidding docs furnished by the owner or in the contractor’s
quotation
3. **Underlying principle - allocation of risk is determined by the party in the best position to control & handle the risks**
H. Finnerty - Project Financing, Asset-Based Financial Engineering
1. 3 types of purchase of sale Ks (in the area of finance):
Type of K Degree of Credit Support Provided
Obligates purchaser of the project’s output or services to take

Take-if-Offered delivery and pay for the output or services only if the project is
able to deliver them. No pmt is req’d unless the project is able
38
to make deliveries.
Obligates purchaser of the project’s output or services to pay for

the output or services, regardless of whether the purchaser takes
Take-or-Pay
delivery. Cash pmts are usually credited against charges for
future deliveries
Are no “outs,” even in adverse circumstances beyond the

Hell-or-High-Water control of the purchaser; purchaser must pay in all events, even
if no output is delivered
CH. 11: THE RESOLUTION OF INTERNATIONAL COMMERCIAL DISPUTES

I. 11.0: The Resolution of Business Disputes
A. Forms- Arbitration, mediation, litigation (home, ∆, 3rd party), world bank, Int’l Ct. of Justice (Gov’t only), European Ct. of
Justice (treaty interpretation), WTO, NAFTA, MERCOSUR
B. Choice of Forum- NOTES
1. For. P/ US D/ US CT>>> FNC
2. US P/ FOR. D/ US CT>>> Jurisdiction/SOP
3. US P/ FOR. Gov’t D/ US CT>>>Sovereign immunity
4. FOR. P/ FOR. D/ US CT>>>Jurisdiction/FNC
5. FOR. P/ US D/ P HOME CT>>> FNC/Jurisdiction/ SOP/ ENFORCEMENT
6. US P/ FOR. D/ 3rd PARTY CT>>> Jurisdiction/ SOP/damages/discovery/enforcement- ASSETS (SUE WHERE YOU
CAN GET PAID)
C. Choice of Forum- TEXT
1. Look at convenience, assets, enforceable judgment, available damages, discovery, elements of COA (ease of proof),
quality of judicial system, jurisdiction
D. Jurisdiction-
1. Personal Jurisdiction-
i. Minimum Contacts test
ii. Whether the exercise of personal jurisdiction over the ∆ is reasonable according to notions of fair play and
substantial justice.
2. SMJ- question of jurisdiction in federal or state court, or the existence of jurisdiction in either
i. Domicile- residence-in-fact w/ intent to remain
3. CL- relationship b/t Ct and D
4. Civil Law- Relationship b/t CT and cause of action
E. Service of Process (SOP)-
1. Π in Int’l litigation must think of complying w/ SOP laws of at least two nations>>where P filed suit and where each D
is located
2. The Hague Convention
i. Provides procedural steps that assure P that such compliance will greatly reduce if not eliminate the possibility of a
successful challenge to the SOP or other documents
ii. MANDATORY
F. Forum Non Conveniens-
1. When US Ct has jurisdiction, it doesn't mean that no other court may have jurisdiction
i. CL Only
2. Issues Ct will consider under FNC
i. Nationality of P- forum shopping
ii. Other forums available or adequate?
iii. Private Factors- evidence locations, convenience for witnesses and experts, convenience for parties, translation of
documents, ability to implead 3rd party
iv. Public Factors- nations interest in being the location of litigation, and burden on CT system and jurors serving
G. Discovery-
1. Hague Convention- helpful to the gathering of evidence abroad
i. tries to meet needs of forum ct. to obtain evidence that ct. considers admissible, while not imposing upon the foreign
parties or sources of evidence demands that are overly excessive under the rules of their nation
39
ii. US issue w/ Art. 23 of convention: allows signatories to restrict pretrial production of documents
a. US thinks rule reflects civil law tradition nations lack of understanding of CL trial procedure
H. Choice of Law-
1. Ks- choice of law provision usually included, if not you determine nation most closely connected to transaction or at
least having a significant relationship to transaction
2. Tort- place of injury
3. Proving Foreign Law- Rule 44.1 of DRCP
i. req’s party who plans to request the application of foreign law to give reasonable notice
a. allows the court wide latitude in determining foreign law
I. Recognition and Enforcement of Foreign Judgments-
1. US- state law determines whether to enforce foreign judgment- NO TREATY
2. Uniform Foreign- Country Money Judgments Recognition Act (UFCMJRA)- enacted by 30 states
i. provide for recognition unless one of the listed defenses is met
a. Most foreign nations don’t recognize foreign judgments
II. 11.1: Resolution of International Disputes: Televisions Everywhere: Choice of Forum and Jurisdiction: Camelot
(Canadian) manufacturer of TVs sold in Canada & abroad. They are largely made from Japanese components purchased from
Mitsuey (Japanese Manufacturer). Camelot’s int’l sales administered through wholly owned subsidiary, Lancelot (DE USA).
Lancelot place of business is in Boston, where it leases 1 room office, word processors, furniture, and some space in warehouse.
Foreign origin orders usually ship’d from Boston warehouse. Sometimes directly thru Camelot plant (Canada). (Stansbury stated:
should have had a LoC)
1. 2 important pretrial procedural issues
i. Range of possible actions and courts that might be involved in litigation (Choice of Forum)
ii. PJ over foreign ∆s in US courts,
B. PART A - Choice of Forum
1. M/S Bremen v. Zapata Offshore Co. - D Zapata (Houston based Co.) K’d w/ Unterweser (German Co) to tow Zapata’s
drilling rig from LA to Italy. K contained provision claiming that any dispute arising will be treated before London Ct. of
justice. Unterweser’s deep-sea tug “Bremen” departed for Italy. While in Int’l waters, a storm arose, and the drilling rig
was seriously damaged. Zapata commenced suit in DC of Tampa, ignoring K.
i. Rule- Forum-selection clause will not be enforced unless the selected state would provide a more convenient forum
than the state in which the suit is brought
ii. Factors: Location, # of witnesses, preparation and inspection, testimony, does forum choice have any interest?
a. CT holds- expansion of American business and industry will hardly be encouraged if, despite solemn Ks, we
insist on a parochial concept that all disputes must be resolved under our law in our courts.
1. London is reasonable
2. (Stansbury stated: his “students” did not do the agreement in the hypo b/c not where the money is)
C. PART C- Personal Jurisdiction in US Cts. Against Foreign ∆s
1. WWVW Case- Πs argue that ∆s should have foreseen possibility that car would be used in another state and cause injury
there, therefore allowing them to sue a NY retailer in OK on their way to AZ
i. CT- absent some purposeful availment by ∆ corporation of the privilege of conducting activities w/i the forum state,
DP does not permit the assertion of personal jurisdiction over nonresident ∆s based on the unilateral activity of πs
over which ∆s exercise no control
2. Intl Shoe- a state may assert jurisdiction only over those ∆s who have certain minimum contacts w/ the forum state such
that maintenance of the suit does not offend traditional notions of fair play and substantial justice.
3. Perkins- SC held that DP clause neither compelled nor prevented Ohio Cts. from asserting postwar jurisdiction over the
corporation in an action that did not relate to or arise out of its Ohio activities
i. Perkins was corporation operating under Filipino Charter. While Japan occupied Philippine island, corporation
carried on a continuous and systematic, but limited part of its general business in Ohio
a. meetings, business correspondence, banking, stock transfers, pmt of salaries…
4. Helicol- H was Colombian corporation that had K’d to provide helicopter transportation for a Peruvian Consortium.
Helicopter crashed in Peru, and they wanted to bring suit in Texas.
i. Not allowed b/c there were no other contacts w/ forum state other than negotiation of Ks, accepting of checks, and
purchasing helicopters, equipment and training.
5. Asahi- Rear tire blowout in CA. Rider sued Taiwanese manufacturer that produced inner tube and made 20% of total US
sales in Cali.
i. facts do not establish minimum contacts and PJ consistent w/ fair play and substantial justice
40
a. 2 Factors derived from int’l scope of the jurisdictional problem:
1. Unique burdens placed upon one who must defend oneself in a foreign legal system and
2. The potential implications for US foreign policy
III. 11.2: SOP, FNC, and Choice of Law: Orchid Fertilizer to Venezuela: Mott was US corp. incorporated in TX. They
manufactured a slow release fertilizer. Epiphytes an orchid grower from Venezuela bought large quantities of it. Mott discovered
Epiphytes had bad habit of w/holding pmt, and Mott didn’t insist on LoC. Epiphytes refused to pay about 104K. No choice of
forum provision in K. Epiphytes does extensive business in US, about 80% of its orchid production sold throughout US using
Miami subsidiary. Where is the SoP?
A. PART A-Service of Process
1. Service of Process must comply w/ the law of the forum.
2. Federal Ct- Rule 4
i. 4(k)- federal question
ii. 4(e)(h)- Diversity
3. Volkswagenwerk v. Schlunk- Schlunk’s parents killed in car accident. Schlunk filed wrongful death suit on their behalf
in Illinois. Served complaint to VwoA (VWAG’s wholly owned subsidiary). Schlunk attempted to serve amended
complaint to include VWAG by serving VWoA as thier agent
i. Service was proper
ii. Hague Convention does not apply
a. Purpose of Hague- simpler way to serve process abroad
b. if service of process in this case falls w/i Article 1 of Hague Convention, the TC should have granted VWAG’s
motion to quash
c. State law determines whether you serve overseas or local subsidiary (substituted service)
4. Bankston v. Toyota Motor Corp.- P attempted to serve D by sending summons and complaint by registered mail to
Japan. Dos were in English, did not include translation into Japanese.
a. Article 10(a) of the Hague Convention- does not permit a copy of summons and complaint by registered mail
to ∆ in foreign country
5. (Stansbury said: if you have a foreign ∆, may be easier to abide by Hague)
i. Under Hague → easier to follow money; even though it’s convenient and may have jurisdiction...still may not be
enforced where the money is
B. PART B- Forum Non Conveniens (VERY POTENTIAL TEST MATERIAL)
1. Litigating International Commercial Disputes
i. Forum non conveniens test:
a. (1) Adequate alternative exist?
1. If yes → step 2
b. (2) Private factors:
1. Evidence
2. Witnesses
3. Cost on court
4. Relevant premises
5. Enforceability
c. (3) Public Factors:
1. Congestion of court
2. Burden on juries
3. Local controversies decided at home
4. Conflicts of law complexion on court
d. Presumption to enforce π’s choice
1. BoP to rebut presumption - there is no reversal absent abuse
2. Piper Aircraft v. Reyno
i. Airplane crashed in Scotland; wrongful death suit brought in California (b/c Scotland does not have strict liability),
was transferred to Pennsylvania court
ii. Scope of alternative law - does not matter to inquiry unless there is no form of recourse available
a. if the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at
all, the unfavorable change in law may be given substantial weight
1. here, was not clearly inadequate
iii. No public interest found and all private interest favored of Scotland
iv. **since it is a foreign π → do not have to give as much deference to their decision (as compared to a US π)
41
a. means foreign π have a lower hurdle to argue FNC
3. Republic of Bolivia v. Philip Morris Companies
i. Bolivian gov’t brought suit in a TX county court (was bizarre)
ii. was obvious forum shopping
4. Comment on Bridgestone/Firestone and Ford Cases Brought by Πs From Venezuela in Indiana and Texas Courts
English Rule EU Rule
- Adequate alternative - NO FNC

- Private Factors - If you have jurisdiction = that’s all that matters
- NO public factors
5. In Re Union Carbide Corp. Gas Plant Disaster at Bhopal, India in December 1984
i. US District Court for Southern District of NY granted FNC subject to 3 conditions:
a. No SoLs defense/agree to India’s jurisdiction (directed at ∆)
b. Pay judgment only if consistent w/ Due Process (directed at India)
c. FRCP will apply (directed at India)
ii. Court held:
a. Condition 1 - not unusual and agreed to it
b. Condition 2 - problematic b/c EU courts do not have the same Due Process standards
1. cannot tell India what to do
2. But NY has a law recognizing foreign judgments
c. Condition 3 - NY court has no power to compel
1. but if India chooses to adopt the FRCP on their own that is okay
iii. Held not okay to do in the US b/c there was no reason to → India
6. So a case b/t 2 US parties, will more or less deference be given to the forum choice? more
7. In case brought in England b/t English ∆ & non-EU member state, which rule applies? English
IV. 11.4: Enforcement of Foreign Judgments
A. PART A - Recognition & Enforcement of Foreign Judgments
1. Hilton v. Guyot
i. In England → foreign judgments are not conclusive
ii. In US → is there a chance for full and fair trial? is there reciprocity?
a. not all states adhere to this analysis
2. Uniform Foreign Money-Judgments Recognition Act (UFMJRA)
i. 30 states and 2 territories have adopted (OK has)
ii. make sure they enforce our judgments if we are to enforce theirs
3. Erie Doctrine - look to state law b/c US has no international treaty
4. 2 options available to a court when dealing w/ a foreign judgment: (obviously, rejection is one)
i. Recognize - “some evidence” → accept some of the findings of fact
ii. Enforcement - res judicata
5. Standard of review in US courts:
i. (1) Foreign court had jurisdiction over person or subject matter?
ii. (2) Adequate notice given?
iii. (3) No fraud in obtaining judgment?
iv. (4) Offend public policy?
v. (5) Reciprocity?
6. Society of Lloyd’s v. Turner
i. Won award of 700,000 pounds in English ct; then 2 district courts in TX to enforce = was granted
ii. 5th circuit said there are 3 parts to the analysis:
a. (1) Impartial tribunal?
b. (2) Have compatible Due Process w/ the US?
c. (3) Cause of action not repugnant?
iii. Court notes:
a. US law comes mostly from English law, so if English courts did it → okay (1 & 2 of analysis)
b. It was argued that England had different elements to the crime than TX uses → did not matter
7. Commentary on the Recognition and Enforcement of Foreign Judgments in the Courts of Other Nations
i. Canada
42
a. limits recognized jurisdiction to 5 bases where:
1. ∆ is a subject of the country in which the judgment is rendered
2. ∆ was a resident of the country when the action begun
3. ∆, in the character of the π, selected the forum in which he was sued
4. ∆ voluntarily appeared
5. ∆ has K’d to submit himself to the judgment of the foreign court
ii. France
a. 5 req’ts must be met for a foreign judgment to be given an exquatur (is needed in order to be given res judicata
effect or to be enforceable in France if there is no international agreement to the contrary):
1. Judgment must have been rendered by ct having jurisdiction under pertinent French rules
2. Foreign judgment must comply w. the minimum standards of procedural fairness prescribed by ordre
public
3. Foreign court must have applied the “correct” law
4. Even where French choice of law rules are satisfied, a judgment that violates public policy will not be
given effect
5. Foreign judgment need not be final, but “the judgment must be executoire (capable of immediate
enforcement in the place of its origin)
V. 11.5: International Enforcement of Foreign Arbitral Awards
A. In U.S. → Federal Arbitration Act (FAA) & Implemented Convention on Recognition & Enforcement of Foreign Arbitral
Awards
i. Both provide for recognition and enforcement of foreign arbitral awards
ii. 2 Xs: (US declared 2 jurisdictional reservations)
a. Award be made only in the territory of a K’g state
b. Dispute arise out of a relationship considered to be “commercial” under U.S. law
iii. 8 Express defenses available to a party which opposes recognition or enforcement:
a. Incapacity of a party to the arbitration agreement
b. Award which is outside the scope of the submission to arbitration
c. Improper procedure or composition of the tribunal
d. Non-finality of the award due to a stay or suspension
e. Agreement providing for arbitration is invalid under the law to which parties have subjected it
f. Subject matter of dispute cannot be arbitrated under the law of the recognizing/enforcing nation
g. Recognition/enforcement of award contrary to public policy of the recognizing/enforcing nation
43

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International Business Transactions Outline 2015

CH. 4: AGREEMENTS FOR THE INTERNATIONAL TRADING OF GOODS

CH. 5: FINANCING THE INTERNATIONAL SALE OF GOODS

CH. 6: TARIFF AND NON-TARIFF IMPORT BARRIERS

CH. 7: RESPONSES OF DOMESTIC PRODUCERS TO IMPORT COMPETITION

CH. 10: ESTABLISHING & OPERATING A FOREIGN INVESTMENT

+ It’s yours - no adaptations needed/systems/processes + Less time consuming

+ Easy ++ Limited liability

Obligates purchaser of the project’s output or services to take

Obligates purchaser of the project’s output or services to pay for

Are no “outs,” even in adverse circumstances beyond the

CH. 11: THE RESOLUTION OF INTERNATIONAL COMMERCIAL DISPUTES

- Adequate alternative - NO FNC

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