Foreign Sovereign Research Articles

Chinese Investment & Economic Development in the U.S. - Legal & Policy Issues.

As a result of the 2008 global financial crisis and the Great Recession, states are confronting fierce fiscal challenges and the job market is weak. In addition, the U.S. economy is not recovering as it has in past economic downturns. The possibility of a double-dip recession is becoming more of a harsh reality. In response to these increasingly bleak prospects, states have become more aggressive in the global marketplace. The federal government is becoming more supportive of states as they expand their international economic development efforts. Along with President Obama’s revived export push, his newer international investment initiatives are reaffirming traditional U.S. open investment policies. These policies intend to remove regulatory uncertainties restricting foreign direct investment (FDI) in the U.S. What should states and the federal government do to promote FDI and economic development given growing concerns over national security? What are the legal and policy issues? After assessing the legal and policy issues concerning Chinese investment in the U.S., I have several suggestions. First, states need to follow an aggressive economic development policy focusing on attracting Chinese and other FDI. States ought to assess their business and regulatory environments to ensure equal treatment for foreign corporations. Second, the federal government ought to remove unnecessary legislative and regulatory barriers to foreign investment in the name of national security that promotes protectionism. It should adopt a systematic and aggressive policy of promoting FDI. The federal government should also promote greater use of bilateral investment and tax treaties to encourage greater foreign investment. Foreign corporations and sovereign wealth funds have the money and desire to invest in the U.S., which is good for the U.S. job market.

D. C. Circuit Finds Foreign Sovereign Immunities Act Does Not Preclude Contempt Sanctions on Foreign State for Noncompliance with Discovery Orders

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2010 cultural heritage legal summary

The year 2010 was a relatively quiet one for legal developments with respect to archaeological heritage. Some court decisions that were expected this year, such as that concerning foreign sovereign immunity for artifacts on loan from Iran to the Oriental Institute of the University of Chicago, did not materialize, while other disputes remain on appeal, such as that involving the disposition of 500,000 gold and silver coins taken from an early 19th century Spanish shipwreck by Odyssey Marine. One of the most closely watched cases, the trial in Italy of the former J. Paul Getty Museum curator, Marion True, ended inconclusively when time ran out for the prosecution. Nonetheless, recovery and restitution of cultural objects that were brought illegally into the United States continued, as did controversies concerning the bilateral agreements concluded between the United States and other nations, pursuant to the 1983 Convention on Cultural Property Implementation Act, the United States' legislation implementing the 1970 UNESCO Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. The following review focuses on legal developments primarily in the United States, as the United States participates in international treaty regimes to protect cultural heritage.

Information asymmetries and conflict of interest during the Baring crisis, 1880–1890

This article examines the potential conflict of interest of underwriters in London's foreign sovereign debt markets prior to the Baring crisis of 1890. We describe the main sources of information for investors concerning Argentina, whose government debt default contributed to Baring's collapse, and compare them with those of the underwriters, particularly Baring's. We then present some empirical evidence using data on bond prices and underwriting fees that demonstrate that Baring did not exploit its information lead to the detriment of investors. Finally, we present historical evidence that shows that Baring foresaw default before markets did and consequently planned a bailout loan that could not be issued due to political instability in Buenos Aires.

International Law and the U.S. Common Law of Foreign Official Immunity

In Samantar v. Yousuf, 130 S. Ct. 2278 (2010), the U.S. Supreme Court unanimously held that the Foreign Sovereign Immunities Act does not apply to lawsuits brought against foreign government officials for alleged human rights abuses. The Court did not necessarily clear the way for future human rights litigation against such officials, however, cautioning that such suits may still be barred by foreign sovereign immunity under the common law. At the same time, the Court provided only minimal guidance as to the content and scope of common law immunity. Especially striking was the Court’s omission of any mention of the immunity of foreign officials under customary international law (CIL). In this Article, we explain why, notwithstanding the Supreme Court’s inattention in Samantar to the international law backdrop of the case, CIL immunity principles are likely to be relevant to the development of the post-Samantar common law of immunity. In considering the relationship between CIL and common law immunity, the Article makes three contributions. First, it sets forth a case for CIL’s relevance that is not dependent on a single theoretical perspective regarding the domestic status of CIL. Second, it presents a balanced assessment of the rapidly evolving CIL landscape, noting in particular the erosion of immunity protections for human rights violations in criminal proceedings and the lack of a similar erosion - at least so far - in civil suits for damages. Third, by emphasizing institutional considerations rather than arguing for a particular outcome, it isolates and analyzes particular variables - such as the views of the Executive Branch and the policies embodied in domestic statutes - that will shape how CIL affects the common law of immunity after Samantar.

Miami Arbitration Reports: Unique Cases to Give Readers aBroader Understanding of Arbitration

ABSTRACT: This edition of MAR capitalizes on some unique cases to give readers a broader understanding of arbitration. First, we look at the scope of the arbitral clause within employment arbitration. The Fifth Circuit uses a factually challenging case to draw a bright-line rule and cir­cumscribe even the broadest of clauses. Second, Erica Franzetti from Crowell & Moring helpfully synthesizes the development of a recent line of cases on 28 USC 1782. As our first special contributor, she provides a timely analysis of a fascinating subject. Third, a domestic arbitration gives the Seventh Circuit a chance to expand the scope of 9 USC 5 in the context of the selection of an arbitrator. And finally, the Second Circuit looks at an attempt to confirm an arbitral award against a foreign state. It lays out some helpful rules in the context of personal jurisdiction, and pens an opinion opening interesting questions of due process and the interpretation of the Foreign Sovereign Immunities Act.

Immunities for Ex-Foreign Officials Accused of International Crimes

The US Supreme Court in Yousuf v. Samantar recently ruled that the Foreign Sovereign Immunities Act, the law extending immunity in US courts to foreign States, does not apply to individuals. Instead, the US Executive Branch retains authority to determine whether a foreign official is entitled to immunity. Although the opinion relied exclusively on domestic law, it adds to an ongoing debate in international law over the extent to which individual State officials are entitled to immunity for acts committed during their service. This debate, taking place in domestic courts facing similar circumstances as the Supreme Court addressed in Samantar, in international courts, in treaties, and among international scholars, is increasingly relevant as many States address their responsibilities under international human rights treaties like the UN Convention Against Torture.This paper surveys the current application of foreign immunity for individuals in English speaking nations, in international agreements and courts, and as discussed by legal scholars. Noting the current, somewhat confused, application of the principle, I then recommend that domestic courts apply the long standing principle of personal immunity (ratione personae) to foreign officials during their time in office and act based immunity (ratione materiae) to ex-foreign officials sued for decisions or acts committed during their time in office.

Watch Out, Ministers! You are Not Immune under the U.S. Foreign Sovereign Immunities Act

Recently the United State Supreme Court made a decision on whether the U.S. Foreign Sovereign Immunities Act (FSIA) should apply to a foreign official. In a U.S court, a civil action was brought by some victims of human rights violations, such as torture and extrajudicial killings in Somalia, commanded by a former Somalian government official who was Defense Minister at the time of such violations. The foreign official claimed immunity from the jurisdiction of the U.S. courts under the FSIA which grants immunity, with exceptions, to a foreign state including “agency or instrumentality of a foreign state.” He contended that since he was a high-ranking government official, he could be categorized as an “agency or instrumentality of a foreign state,” and subsequently, he is immune as a foreign state The Supreme Court rejected his claim, denying the application of the FSIA to the immunity of foreign officials. The Court's main argument is that an “agency or instrumentality” under the FSIA means an “entity” which includes a legal person, not a natural person. Thus, the immunity issue of a foreign official cannot be analyzed by the FSIA, but by the common law such as case laws. This decision is quite meaningful since it clearly sets up the scope of the FSIA by distinguishing immunity for a foreign state from that for foreign officials. With this new decision, the Court abrogated precedents of lower courts which have allowed or discussed immunity of foreign officials under the FSIA. Although this decision left open some important questions, such as whether a former foreign official can be immune if he acted within his official capacity, whether human right violations can be regarded as acts committed within or outside the scope of official capacity, whether such human right violations may be subject to exceptions to immunity, etc., the decision at least primarily may prevent a foreign official from simply raising his immunity defense under the FSIA. Consequently, it is expected that immunity of foreign officials will be scrutinized, by applying the well-recognized common law including international law. This paper takes a glance at the FSIA from its legislative history to rules on immunity for a foreign state to find out whether the FSIA may apply to foreign officials, and then reviews backgrounds and discussions of this case from lower courts to the Supreme Court.

Foreign Sovereign Immunity in a Hyper Globalized World

The recent economic downturn substantiated the interconnectedness of all nations; not a single developed nation escaped unscathed from the global meltdown. Any vestiges of isolationism that existed in the 20th century have since evaporated. We are in the throws of a paradigm shift towards pervasive interdependancy; an era where all nations, rich or poor, land-locked or island, democratic or dictatorial, sink or swim together. This increasing interconnectedness has shaken the international legal landscape to its very core. Longstanding laws and traditions are being forced to function in a world radically different from the days those laws were conceived. Even relatively recent laws are being forced to grapple with the strange new paradigm of instant global commerce and rapidly shifting diplomatic alliances (e.g. China our enemy to China our friend). This paper asserts how one important law, the Foreign Sovereign Immunity Act (FSIA) has failed to adapt to the newly established hyper-globalized paradigm, and analyzes the implications this has on the ability of the Executive branch to pursue foreign policy objectives.

The Challenges of Enforcing an Arbitral Award Against a Foreign State in the United States

A party seeking to enforce an arbitral award against a sovereign state or stage agency in the United States may face practical challenges due to the Foreign Sovereign Immunities Act (FSIA). In particular, the FSIA presents two hurdles which must be crossed by an arbitral award. This article will consider these hurdles and discuss whether the United States is an appropriate forum for a party seeking to enforce an arbitral award against a foreign state or agency, and whether the FSIA puts an arbitral award holder in an inferior position to a sovereign state or agency by granting it excessive immunity.

The transformation of diplomacy: mysteries, insurgencies and public relations

There has recently been a resurgence of interest in the art of diplomacy, fuelled by the growing popularity of the idea of ‘soft power’. This article reviews three books key to this revival, all of which argue that a transformed and revitalized diplomacy can and should play a positive role in international politics. One calls for diplomats to overcome their traditional reserve and become ‘guerrillas’ fighting for human security, peace and development; another for a broader and deeper engagement with ‘public diplomacy’—the practice of speaking to foreign peoples rather than just foreign sovereigns. The last favours a return to inherited diplomatic wisdom now half-forgotten. While welcoming this renewed concern for diplomacy, this review article argues that its place in contemporary international politics is perhaps less secure than the works reviewed allow. The ‘management of legitimacy’—the central task of diplomats—is a much more difficult task than is often acknowledged.

Better Never than Late: Why Yousuf v. Samantar should be Overturned by the Supreme Court

The Supreme Court recently granted Certiorari in Yousuf v. Samantar. This paper addresses the decision the Supreme Court will make regarding whether the Foreign Sovereign Immunities Act (FSIA) encompasses individual officers acting within the scope of their authority. Yousuf v. Samantar came on the heels of the Second Circuit's decision In re Terrorist Attacks on September 11, 2001, which affirmed the majority approach - that individual officers are protected by the FSIA. Youuf v. Samantar, however, established the minority approach to the FSIA - that individual officers are not included. This paper argues that the the two approaches reflect philosophical differences rather than differences in statutory interpretation, and takes the position that, in the absence of a statutory mandate, practical considerations weigh in favor of the majority approach.

Foreign Sovereign Immunity and Domestic Officer Suits

Under international law, official-capacity suits brought against a foreign state’s officers are treated as suits against the state itself and thus as subject to the state’s immunity, even in suits alleging human rights abuses. This immunity regime differs from the immunity regime that applies in the United States in suits brought against state and federal officials for violations of federal law. Despite the federal government’s sovereign immunity and the immunity of state governments under Eleventh Amendment jurisprudence, courts often allow suits against federal and state officers for their official actions. This essay attempts to explain why the immunity rules differ between the two regimes. We begin by showing that the differential treatment of foreign and domestic officer suits has deep roots in British and American common law. We then show that Congress has not acted to alter this common law backdrop, and we explain the significance of this fact. Finally, we discuss functional reasons for the long-time differential treatment of suits against domestic and foreign officials.

Sovereign Risk Premia

Emerging countries tend to default when their economic conditions worsen. If bad times in an emerging country correspond to bad times for the US investor, then these foreign sovereign bonds are particularly risky and should offer high returns. We explore how this mechanism plays out in the data and in a general equilibrium model of optimal borrowing and default. Empirically, we obtain a cross-section of sovereign bond returns: the higher the correlation between past bond returns and US corporate default risk, the higher the average bond returns. A model of risk-averse lenders with external habit preferences replicates this feature.

Nemariam and Others v. Federal Democratic Republic of Ethiopia and the Commercial Bank of Ethiopia and the Commercial Bank of Ethiopia (No 2)

679State immunity — Jurisdiction — State immune unless exception to immunity applicable — United States Foreign Sovereign Immunities Act 1976 — Expropriation exception — Scope — Intangible property — Distinction between expropriation and repudiation of contractual rights — The law of the United States

Innovation after the revolution: foreign sovereign bond contracts since 2003

Practitioners and academics agree: bond contract terms are highly standardized and hard to change. The dominant theory of contract change, based on network and learning analysis, posits that market participants value uniformity. Everyone uses standard terms; everyone knows what they mean. Market participants who trade boilerplate contracts have no trouble pricing them. Lawyers who draft contract boilerplate can predict how judges might interpret it. The down side of boilerplate is excess uniformity: change is Key points

State Sponsors of Terrorism are Entitled to Due Process Too: The Amended Foreign Sovereign Immunities Act is Unconstitutional

In 1996, Congress, as part of the Antiterrorism and Effective Death Penalty Act of 1996, amended the list of noncommercial tort exceptions to sovereign immunity in the Foreign Sovereign Immunities Act (FSIA) in response to a federal court's determination that it lacked subject matter jurisdiction over Libya and alleged Libyan terrorists in Smith v. Socialist People's Libyan Arab Jamahiriya, one of many cases resulting from the terrorist bombing of Pan Am Flight 103 over Lockerbie, Scotland. The ambiguously worded amendment appears to give federal courts both subject matter jurisdiction, which Congress clearly intended, and personal jurisdiction over the seven nations currently listed by the Executive Branch as state sponsors of terrorism. The United States District Court for the Southern District of New York, the only court to address the amended FSIA, unconstitutionally interpreted it as according the court personal jurisdiction over Libya in the re-filed suit by the survivors, executors, administrators, and personal representatives of those killed over Lockerbie. This Article demonstrates that giving the court personal jurisdiction over a foreign sovereign simply because the Executive Branch has concluded that it is a state sponsor of terrorism or because an offshore terrorist act had some effect in the United States would violate the Due Process Clause of the Fifth Amendment absent the performance of traditional minimum contacts analysis under both the specific and general personal jurisdiction tests.

Cuba is No Longer a 'State Sponsor of Terrorism': Why the Foreign Sovereign Immunities Act Sanction Failed

Following newspaper reports that President Bush's Administration had begun developing a plan for relations with a post-Castro Cuba, I began to wonder - only partially in jest - if Cuba's then seventy-seven year old dictator had responded by developing his own plan for relations with a post-Bush America. As Professor Gordon has pointed out, Castro has remained in power throughout the reigns of ten U.S. Presidents: Dwight Eisenhower, John Kennedy, Lyndon Johnson, Richard Nixon, Gerald Ford, Jimmy Carter, Ronald Reagan, George H.W. Bush, William Clinton, and George W. Bush. This despite a wide variety of sanctions imposed against the dictator's regime.This paper focuses on just one of the various sanction measures taken against Cuba: its denomination as a State Sponsor of Terrorism, which opens it up to lawsuits under the Foreign Sovereign Immunities Act (FSIA). Herein I will argue that this sanction has failed, not just for the same reason that the other sanctions against Cuba have failed, but also because of the particular flaws inherent in the FSIA.

A Theory of Taxing Sovereign Wealth

Sovereign wealth funds enjoy an exemption from tax under section 892 of the tax code. This anachronistic provision offers an unconditional tax exemption when a foreign earns income from non-commercial activities in the United States. The provision, which was first enacted in 1917, reflects an expansive view of the international law doctrine of immunity that the United States (and other countries) discarded fifty years ago in other contexts. The Treasury regulations accompanying section 892 define non-commercial activity broadly, encompassing both traditional portfolio investing and more aggressive, strategic equity investments. Because section 892 was not written with wealth funds in mind, the policy rationale for this generous tax treatment has not been closely examined before. This Article provides a framework for analyzing the taxation of wealth. I start from a baseline norm of sovereign tax neutrality, which would treat the investment income of foreign sovereigns no better and no worse than private investors' income. Nor would it favor any specific nation over another. Whether we should depart from this norm depends on several factors, including the external costs and benefits created by wealth investment, whether tax or other regulatory instruments are superior methods of attracting investment or addressing harms, and which domestic political institutions are best suited to implement foreign policy. I then consider whether we should impose an excise tax that would discourage wealth fund investments in the equity of U.S. companies. If desired, the tax could be designed to complement nontax economic and foreign policy goals by discouraging investments by funds that fail to comply with best practices for transparency and accountability. The case for repealing the existing tax subsidy is strong. We should tax wealth funds as if they were private foreign corporations; there is no compelling reason to subsidize wealth. My analysis also shows that imposing a special excise tax may not be the optimal regulatory instrument for managing the special risks posed by wealth funds, although a carefully-designed tax would be more effective than the status quo.

Is the Erecting of Barriers Against Foreign Sovereign Wealth Funds Compatible with International Investment Law?

The impact of overseas investments by Sovereign Wealth Funds (SWFs) is increasingly causing alarm in destination countries. Many Western governments show high concern with SWFs investing in some of their strategic economic sectors, such as energy or high technologies. Consequently, several of these governments have issued new domestic rules to control and even cancel investments operated by SWFs, or are about to do so. The aim of this work is to assess the compatibility of these new legislations with international investment law.