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Survey of 1997 Developments in International Law in Connecticut - 72 Connecticut Bar Journal 364 (1998)
72 Connecticut Bar Journal 364 (1998)
Once again, the number of cases involving international law increased. Prominent among the topics of 1997 decisions were extradition and arbitration. Several matters involved Hong Kong and its transfer from British control to the People's Republic of China.
A. Involuntary Liquidation of Foreign Banks' Assets
New legislation gave the Banking Commissioner strong powers to protect Connecticut creditors of foreign banks by taking control of their in-state assets and applying those assets to the claims of in-state creditors before releasing the excess, if any, for other purposes. (fn1) However, a notable provision of this law significantly limits the setoff rights of creditors of foreign banks:
[N]o person may set off the business and property in this state of a foreign bank against liabilities of such foreign bank other than those that arise out of transactions entered into by such person with the state branch or state agency of the foreign bank in this state .... (fn2)
The purpose of this is to protect the in-state assets for application by the Commissioner to in-state claims, but after paying or providing for those claims, the Commissioner is required to turn over the remaining assets to the principal office of the foreign bank or to its liquidator or receiver. (fn3) The unfortunate result may be that some creditors who expected to have the benefit of setoff in Connecticut will find themselves in the queue of unsecured creditors in another part of the world.
B. Trade with Africa
While bills to promote trade with Africa, notably by expanding the categories of duty free imports, languished in Congress, (fn4) the Connecticut legislature took a symbolic step. Promotion of Connecticut trade with Africa may be given priority by the Department of Economic and Community Development under a new law (fn5) that appears to have no counterpart. authorizing priority treatment for any other region of the world. To allay fears that this state policy might conflict with national policies, such as the sanctions against Libya, (fn6) Substitute Senate Bill No. 1098 was amended to limit the priority to "African countries with whom the United States has diplomatic relations."
C. Victims of International Terrorism
A modification of General Statutes Sections 54-209 and 54-211 (fn7) now allows victims of international terrorism' to be compensated by the Connecticut Office of Victim Services. Compensation can be awarded for such an act of terrorism committed anywhere in the world, provided the victim was a Connecticut resident at the time of injury or death.
D. Permanent Deportation of Prisoners
Public Act 95-162, now Section 18-26a of the General Statutes, provides:
(a) The Board of Pardons shall enter into an agreement with the United States Immigration and Naturalization Service for the deportation of persons incarcerated in correctional facilities in the state who are aliens upon the conditioned commutation of their punishment by said board.
(b) The Board of Pardons may grant a commutation of punishment in the case of any person incarcerated in a correctional facility in the state who is an alien and transfer such person to the United States Immigration and Naturalization Service for deportation in accordance with the agreement entered into pursuant to subsection (a) of this section provided such person agrees not to contest his criminal conviction and deportation.
The required agreement was signed on August 7, 1997, (fn9) and immediately became controversial, in part because the conditions required of the inmate include remaining outside the United States permanently, which may be excessive in some cases, but probably more significantly because it may raise some constitutional issues. For example, the inmate, who may be a legal immigrant, may feel pressured to accept this arrangement rather than remain in prison, and may well not have the assistance of counsel in evaluating the offer.
II. CASES (fn10)
Courts in several countries, but particularly the United States and the United Kingdom, were concerned in 1997 with the effects of the July 1 handover of Hong Kong to the People's Republic of China. (fn11) A very significant decision, albeit not from Connecticut, was the Second Circuit's ruling (fn12) that a Hong Kong company is not a "citizen or subject of a foreign state" for purposes of Article III, Section 2 of the Constitution (fn13) and diversity jurisdiction. (fn14) Because Hong Kong was not recognized as a separate and sovereign entity by the United States and because the court was not persuaded that a Hong Kong company was a creature of British law, such a company is "stateless," and stateless persons, whether natural or juridical, are not allowed to sue in our federal courts. Similar reasoning might apply to companies established in other special jurisdictions, such as Bermuda, (fn15) the British Virgin Islands, the Cayman Islands, (fn16) the Channel Islands, (fn17) the Falkland Islands, Gibraltar, the Isle of Man and St. Helena (to name only some British dependencies). Although such suits still can be brought in state courts (and perhaps in other Circuits (fn18)), this crabbed interpretation of the federal courts' alienage jurisdiction is to be regretted. (fn19)
A. Extradition and Bail
The United States, like Canada (fn20) and the United Kingdom, (fn21) presumes, until strong evidence is provided to the contrary, that nations with which extradition treaties are in force have adequate standards of criminal justice. (fn22) Some countries, however, have taken a position more protective of the accused, (fn23) particularly since the decision of the European Court of Human Rights in Soeying, (fn24) in which it was held that the defendant should not be extradited to Virginia because there he was likely to be subjected to the inhuman or degrading treatment of being kept on death row for several years.
Some prominent extradition cases elsewhere in 1997 involved Hong King. For example, the Court of Appeals for the First Circuit, reversing a decision of the District Court for the District of Massachusetts, (fn25) ordered that a defendant continue to be held without bail, subject to extradition to Hong Kong, (fn26) although it seemed clear that he would be tried by the courts of the People's Republic of China. A key basis for the First Circuit's decision was its finding that the literal terms of the relevant treaties between the United States and the United Kingdom (fn27) required the extradition. The House of Lords reached a similar result on similar facts, (fn28) but on the narrower ground that "it was not irrational for the Secretary of State to say that he was not persuaded that there was a case on
human rights grounds for refusing extradition to Hong Kong.. "
In Connecticut cases involving high profile defendants (but not involving Hong Kong), the Federal District Court considered whether to allow bail to a defendant fighting extradition to Italy, while the Superior Court at Stamford considered whether to allow bail pending appeal of conviction to a defendant who had fled the country to avoid trial but had later surrendered in Switzerland and been extradited to Connecticut.
1. In re Extradition of Rovelli
Felice Rovelli (better known as Felix Rovelli, the manager of the Neuberger International Fund) and others were charged in Italy with obtaining a judgment equivalent to some $446 million by paying several Italian judges a tenth of that amount. Rovelli, who left Italy 21 years before, at the age of 18, was arrested at the request of the Italian authorities and held for extradition. Announcing to the court "his intention to exhaust every possible remedy at every level of the federal judiciary," (fn30) he asked for bail.
There is a presumption in favor of bail in domestic criminal cases, but in extradition proceedings there is strong presumption against it, (fn31) largely because United States treaty obligations are at stake. The usual rule is that bail in extradition cases will be allowed only in "special" or "most pressing" circumstances. (fn32) In a recent case, (fn33) the Ninth Circuit found this rule unconstitutional, but in Rovelli, Magistrate judge Smith declined to follow that decision, instead applying "the clear and longstanding extradition precedent of the United States Supreme Court and the Second Circuit." (fn34)
The defendant's family and friends offered to post a full surety bond of more than $10 million, but the court, which compared this amount to Mr. Rovelli's apparent wealth and the amounts he admittedly paid to lawyers that allegedly were used for bribery, seemed less than convinced that this bond would eliminate the risk of flight. More significantly, however, the court noted that even if this were established, it would not be sufficient in an extradition case, because the absence of risk of flight does not constitute a special circumstance. Other arguments put forward by the defendant, such as his substantial ties to the community and his need to consult with his attorneys about this and other pending litigation, were similarly found not to qualify as special circumstances.
2. State v. Kelly (fn35)
Alex Kelly was arrested and charged with sexual assault and other crimes in 1986. He was released on a bond posted by his parents, but promptly disappeared; they paid the forfeited bond in cash. For the next eight years, he seems to have lived and traveled widely in Europe and North Africa, but in 1995 he surrendered in Switzerland. Extradition treaties ordinarily include a "speciality" clause, which limits prosecution in the requesting state to the specific crimes for which the defendant was extradited. In addition, Swiss courts have and exercise the power to impose conditions on extraditions from Switzerland. (fn36) Thus the defendant could not be tried at this time on charges of failure to appear, threatening and violation of probation, because these were not among the specific crimes listed in the extradition order.
B. International Arbitration: Hartford Fire Ins. Co. v. Lloyds Syndicate 0056 ASH (fn37)
In an interesting case (fn38) that did not arise in Connecticut, the Second Circuit Court of Appeals reviewed the law regarding confirmation, modification, and setting aside of arbitral awards under the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (fn39) known as the "New York Convention":
The Convention specifically contemplates that the state in which, or under the law of which, the award is made, will be free to set aside or modify an award in accordance with its domestic arbitral law and its full panoply of express and implied grounds for relief. See [New York] Convention art V(l) (e). However, the Convention is equally clear that when an action for enforcement is brought in a foreign state, the state may refuse to enforce the award only on the grounds explicitly set forth in Article V of the Convention. (fn40)
This was an arbitration conducted under the auspices of the American Arbitration Association. It followed that the federal court was authorized to review the award under the Federal Arbitration Act (fn41) for manifest disregard of the terms of the agreement or of the law.
In Hartford Fire Ins. Co. v. Lloyds Syndicate, the contract between The Hartford and its reinsurers included coverage for punitive damages. All disputes arising under the contract were to be submitted to arbitration and the arbitrators were given broad authority to dispense with judicial formalities and "the strict rules of law." The Hartford sought and the arbitrators awarded indemnification for punitive damages levied against it in two separate cases in Oklahoma and California, but the reinsurance syndicate still declined to pay. The Hartford brought this action in the District Court for the District of Connecticut to confirm (fn42) the award under the New York Convention.
The defendants moved to vacate the award on the ground that indemnification of punitive damages assessed as a penalty would violate "the public policy of the United States (as evidenced in the law of the State of Connecticut)." (fn43) After disposing of the plaintiff's claim that the New York Convention does not allow for a petition to vacate an arbitration award, (fn44) Judge Covello reviewed the authorities to the effect that the Convention preempts any state law or state public policy defenses unless the parties have contracted otherwise. Notable in this regard is Mastrobuono v. Shearson Lehman Hutton, Inc., (fn45) in which the United States Supreme Court required enforcement of an arbitrator's award of punitive damages where New York law permitted only the judiciary to make such awards. In search, finally, of any United States public policy on indemnification of punitive damages, the court looked for relevant cases in all 50 states, concluding that 34 allow indemnification of punitive damages in various circumstances, seven forbid it, and no decisions were found on the point in the remaining nine. The one Connecticut
case cited is Avis Rent A Car System, Inc. v. Liberty Mutual Insurance Co., (fn46) in which the Supreme Court considered public policy objections but held that the insurance contract in question provided coverage for punitive damages.
C. Forum Non Conveniens: Lo v. Aetna International, Inc. (fn47)
Aetna International, Inc., a Connecticut corporation, employed Judy Tien Lo, a United States citizen, in Hong Kong from 1987 to 1995. She moved to the United States and subsequently sued Aetna International at its home office in Connecticut for failing to provide her certain disability benefits to which she claimed to have become entitled by contract while in Hong Kong. Aetna International asked the Superior Court to dismiss the action on the ground of forum non conveniens, claiming Hong Kong was a more convenient forum. The court declined to do so.
The plaintiff's choice of forum usually is given significant weight in such cases, and more so when, as here, the plaintiff can be seen as local. It would have been sufficient to find that the Connecticut forum was not inconvenient, because no rule requires the court to defer to a jurisdiction that is merely more convenient. Unfortunately, the court added dicta that "the Republic of China [sic] [is] a nation which has not been known as a paragon of justice for common citizens. Grave doubt has been expressed as to the status of private litigation" when Hong Kong comes under Chinese control. (fn48) While the court might privately harbor such thoughts, concern for good international relations suggests that they should not be published by an organ of the state, particularly where they are not necessary to the
D. The Limits of Tribal Sovereignty: Sbrogna v. Jowett (fn49)
Plaintiff alleged that two employees of the Mashantucket Pequot Gaming Commission instigated, and a Connecticut state trooper committed, a false arrest at Foxwoods Resort and Casino. The casino-employee defendants asserted that plaintiff had failed to exhaust tribal remedies and that the claim in federal court was barred by tribal sovereign immunity. Judge Chatigny rejected these motions to dismiss on the ground that tribal sovereign immunity protects only the tribe, not persons sued in their individual capacity.
E. A Safe Workplace Abroad: Parsons v. United Technologies Corporation (fn50)
Gary Parsons was an at-will employee of Sikorsky Aircraft, which fired him when he refused to travel to Bahrain during the Iraqi invasion of Kuwait. In reviewing the dismissal of his actions for damages for wrongful discharge and for negligent and intentional infliction of emotional distress, the Supreme Court considered several provisions of the General Statutes and concluded "that this body of law expresses a clear and defined public policy requiring an employer who conducts business in Connecticut to provide a reasonably safe work place to' its employees." (fn51) It did not help Sikorsky that the proposed workplace was in a foreign country:
A Connecticut employer is not relieved of the obligation to provide a safe workplace to its employees because that employer decides to send an employee to a work site outside Connecticut over which the employer has no control. The only relevant inquiry is whether the employer directed the employee to work in a place or condition that poses an objectively substantial risk of death, disease or serious bodily injury to the employee. (fn52)
The number of cases with international aspects continues to increase. As such issues become more and more common, the general practitioner must obtain a familiarity with the basic principles of international law.
*. Of the Meriden Bar.
**. Of the Hartford Bar.
1. P.A. 97-160, effective June 24, 1997, to be codified at CONN. GEN. STAT. §§36a-428, 36a-428c and §36a-428g. Final regulations were published at 59 Conn. LJ. 7D-13D (Feb. 3, 1998). For a more general discussion of Connecticut's statutory treatment of foreign and out-of-state banks, see Lowry & Schroth, Survey of
1994 Developments in International Law in Connecticut, 69 CONN. BJ 143, 143-147 (1995).
2. Subsection I (g). 3Subsection I (f).
4. H.R. 1432 was subsequently approved by the House on March 11, 1998. At this writing, the Senate has not acted either on H.R. 1432 or on S. 778, which faces opposition from United States textile manufacturers. The latter give some prominence to the argument that Asian countries may transship their products through Africa to the United States, a scenario we view as somewhat far-fetched given the costs and usual duration of shipping by African routes.
5. P.A. 97-135, effective July 1, 1997.
6. The original sanctions against Libya were established by Exec. Order No. 12543 of Jan. 7, 1986, 51 Fed.Reg. 875 (Jan. 9, 1986), prohibiting trade and certain transactions involving Libya, and Exec. Order No. 12544 of Jan. 8, 1986, 51 Fed.Reg. 1235 Jan. 10, 1986), blocking Libyan government property in the United States or held by U.S. persons. These are implemented by the Libyan Sanctions Regulations (Office of Foreign Assets Control), 31 GER. Part 550, as subsequently amended from time to time. Additional support for part of these sanctions is found in Security Council Resolution 883, Nov. 11, 1993. Additional sanctions were imposed by Exec. Order No. 12801 of Apr. 15, 1992, 57 Fed.Reg. 14319 (Apr. 17, 1992), barring overflight, takeoff, and landing of aircraft flying to or from Libya, and the Iran and Libya Sanctions Act of 1996, P.L. No. 104-172, 110 Stat. 1541, 50 U.S.C. §1701 note. Also, Libya is always included in the Treasury Department's list of countries requiring cooperation with an international boycott, such as 63 Fed.Reg. 17044 (Apr. 7, 1998); see Internal Revenue Code of 1986,
§999(a) (3).
7. P.A. 97-59, effective May 8, 1997.
8. As defined in 18 U.S.C. §2331.
9. See Fromm, A (One-Way) Ticket to Ride, Conn. L. Trib., Aug. 18, 1997, at 1.
10. As usual, we have not discussed Second Circuit decisions in the text unless they arose in or had some other connection with Connecticut or otherwise added to the discussion of Connecticut cases. Among the Second Circuit cases involving international issues are:
United States v. Wang, 134 F.3d 79 (2d Cir. 1997), affirming convictions under the Hostage Taking Act, 18 U.S.C. §1203, for taking hostages in New York. The court rejected several constitutional claims and found a sufficient basis for this statute, even as to a purely domestic crime, in the treaty power, U.S. CONST. art
11, §2, cl. 2, and the International Convention Against the Taking of Hostages, Dec. 18, 1979, TL4S No. 11081.
Weinberg v. Israel, 1997 U.S. App. Lexis 36435 (2d Cir., Dec. 31, 1997), in which Holocaust survivors' claims for reparations under treaty between Israel and Germany were dismissed for lack of subject-matter jurisdiction.
United States v. Amer, 110 F.3d 873 (2d Cir. 1997), in which a conviction under the rarely used International Parental Kidnapping Crime Act, 18 U.S.C. §1204, was upheld, in part because Egypt, the country to which the children were removed, was not a party to the Hague Convention on the Civil Aspects of Child Abduction, TIAS No. 11670, 51 Fed.Reg., No. 58 (Mar. 26, 1986).
11. Pursuant to the joint Declaration of the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the People's Republic of China on the Question of Hong Kong, with Annexes, Beijing, Dec. 19, 1984, entered into force May 27, 1985, 23 I.L.M. 1366 (1984).
12. Matimak Trading Co. v. Khalily, 118 F.3d 76 (2d Cir. 1997).
13. U.S. CONST. art. 111, §2, cl. I extends federal judicial power to "all Cases . . . between a State, or citizens thereof, and foreign States, Citizens or Subjects."
14. Closely following the constitutional language, 28 U.S.C. §1332(a)(2) provides for diversity jurisdiction over civil actions between "citizens of a State and citizens or subjects of a foreign state."
15. But see Netherlands Shipmortgage Corp., Ltd. v. Madias, 717 F.2d 731 (2d Cir. 1983).
16. But see note 18 infta and accompanying text.
17. But see Cedec Trading Ltd. v. United Am. Coal Sales, Inc., 556 F.Supp. 722 (S.D.N.Y 1983).
18. Cf. Wilson v. Humphreys (Cayman), Ltd., 916 F.2d 1239 (7th Cir. 1990); Timco Engineering, Inc. v. Rex & Co., Inc., 603 F.Supp. 925 (E.D. Pa. 1985).
19. Judge Altimari contributed a passionate dissent in Matimak, 118 F. 3d at 88, with which we generally agree. See also Biancheria, Restming the Right to Have Rights: Statekssness and Alienage Ju7isdiction in Light of Abu-Zeineh v. Federal Laboratories, Inc., 11 Am. U. J, INT'L L. & POL'Y 195 (1996).
20. See Canada v. Schmidt, [1987] 1 S.C.R. 500; Argentina v. Mellino, (1987] 1 S.C.R. 536.
21. See Belgium v Postlethwaite, [1988] AC 924 (HL); United States v Bowe, [19901 1 AC 500 (PC).
22. E.g., Gallina v. Fraser, 278 F.2d 77 (2d Cir. 1960).
23. See generally Dugard & Van den Wyngaert, Reconciling Extradition with Human Rights, 92 Am. J. INT'L L. 187 (1998).
24. 161 Eur. Ct. H.R. (ser. A) (1989).
25. Lui v. United States, 957 F.Supp. 1280 (D.Mass. 1997) (sometimes erroneously cited as "Kin-Hong v. United States").
26. Lui v. United States, 110 F.3d 103 (Ist Cir. 1997) (sometimes erroneously cited as "Kin-Hong v. United States"), rehearing denied, 1997 U.S. App. LEXIS 7587 (Apr. 17, 1997), stay denied, 117 S.Ct. 1491, 137 L.Ed.2d 816, (1997) (Breyer & Stevens, JJ., dissenting). A case note by James D. Wilets appears in 91
Am. J. INT'L L. 537 (1977).
27. Extradition Treaty, June 8, 1972, U.K.-U.S., 28 U.S.T. 227, 109 U.N.T.S. 167; Supplementary Treaty to the Extradition Treaty, June 25, 1985, TIAS No. 12,050. Note that an extradition treaty with the future government of Hong Kong had already been signed, but not yet ratified (and has not yet been ratified at this writing). Agreement for the Surrender of Fugitive Offenders, Dec. 20, 1996, U.S.-Hong Kong, S. Treaty Doc. No. 105-3 (1997).
28. R v Home Secretary, ex p Launder, [1997] 1 WLR 839. Excerpts appear in NEw LJ., May 30, 1997, at 793, and a case note by James D. Wilets appears in 91 Am. J. INT'L L. 733 (1997).
29. 977 RSupp. 566 (D.Conn. 1997).
30. Id. at 569. As the court notes, in Doherty v. Thornburgh, 943 F.2d 204, 212 (2d. Cir. 1991), an eight-year detention was upheld, in a deportation context, "in part because petitioner possessed, from the outset, 'the key that unlocks his prison cell.' If he [had] agreed to deportation he would not have experienced any of the eight years of detention." 977 F.Supp. at 569 n. 3.
31. Wright v. Henkel, 190 U.S. 40 (1903).
32. Id. (the leading "special circumstances" case); In re Mitchell, 171 F. 289 (S.D.N.Y 1909) ("the most pressing circumstances"); United States v. Leitner, 784 E2d 159 (2d. Cir. 1986).
33. Parretti v. United States, 112 F.3d 1363 (9th Cir. 1995).
34. 977 F.Supp. at 567.
35. 1997 Conn. Super. 2105 (1997) (Tierney, J.).
36. See Dharmarajah c. Minist&e Public FM6ral, ATF 107 lb 68 (1981); P. c. Office F6d6ral de la Police, ATF 117 lb 337 (1991); Loi federale sur Fentraide internationale en mati&e p4~nale, 20 mars 1981, RO 1982 846, as amended, 4 Oct. 1996.
37. 1997 U.S. Dist LEXIS 10858 (D.Conn. 1997).
38. Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys 'R' Us, Inc., 1997 U.S. App. LEXIS 23743 (2d Cir. Sept. 10, 1997).
39. 21 U.S.T. 2517, TIAS No. 6997, effective for the United States Dec. 29, 1970, subject to declarations, RL. 91-368, 84 Stat. 692, 9 U.S.C. §§201-208.
40. 1997 U.S. App. LEXIS 23743 at *24-25.
41. 9 U.S.C. §1 et seq.
42. "The confirmation of an arbitration award is a summary proceeding that merely makes what is already a final arbitration award a judgment of the court." Florasynth, Inc. v. Pickholz, 750 R2d 171, 176 (2d. Cir. 1984).
43. 1997 U.S. Dist. LEXIS 10858 at *16. Art. V, subsection 2(b) of the New York Convention provides that recognition and enforcement of an arbitral award may be refused by the competent authority of a party to the Convention if "[t]he recognition or enforcement of the award would be contrary to the public policy of
44. This would be correct as a general rule, but, as the court noted, a motion to vacate is proper in response to a motion to confirm.
45. 514 U.S. 52 (1995).
46. 203 Conn. 667, 526 A.2d 522 (1987).
47. Superior Court for the Judicial District of Hartford/New Britain at Hartford, Docket No. CV-96-0565058-S (May 12, 1997). See Wolgast, A Hong Kong Controversy, Conn. L. Trib., June 2, 1997.
48. Slip opinion at 2.
49. Unreported ruling on motion to dismiss, Docket No. 3:95CV2495 (D.Conn., Aug. 6, 1997).
50. 243 Conn. 66, 700 A.2d 655 (1997).
51. 243 Conn. at 79, 700 A.2d at 663.
52. 243 Conn. at 82, 700 A.2d at 664. However, an employee whose profession involves inherent risks, such as a security guard or a reporter, might be held to
have assumed those risks in accepting the position. 243 Conn. at 80 n. 17, 700 A.2d at 663 n. 17.