Chapter 1 Cases

Chapter 1
Introduction to International and Comparative Law
Case 1-1. IGNACIO SEQUIHUA V. TEXACO INC. ET AL.
United States District Court for the Southern District of Texas, 1994.
FACTS: Plaintiffs, Ecuador residents, filed suit in Texas over alleged
environmental damage in Ecuador. Plaintiffs pray for money damages, an
injunction to clean up, and a court-administered trust fund. Defendants
bring motions to dismiss.
ISSUE: Should the court decline to exercise jurisdiction based on the
doctrine of comity of nations?
HOLDING: Yes.
LAW: Section 403(3) of the Restatement (Third) of the Foreign Relations
Law of the United States sets out numerous factors in deciding whether
comity of nations deference should be applied.
EXPLANATION: The alleged activities and harm occurred in Ecuador;
plaintiffs all reside in Ecuador; defendants are not Texas residents; the
Republic of Ecuador has objected to the court’s jurisdiction and would
probably not enforce any judgment it issued; and jurisdiction would interfere
with Ecuador’s sovereign right to control its own environment.
ORDER: The case is dismissed under the doctrine of comity of nations.

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 Chapter 1 Cases

Case 1-2. SEI FUJII v. STATE

United States, Supreme Court of California, 1952.
FACTS: A California law made land purchased by a Japanese who was
ineligible for citizenship escheat to the state.
ISSUES: (1) Does California’s alien land law violate the UN Charter? (2) If
it does, is the UN Charter automatically applicable? (3) Does the California
law violate the US Constitution?
HOLDING: The law violates the UN Charter and the US Constitution. The
UN Charter is not self-executing, but the US Constitution is.
LAWS: (1) At the time, there was no US-Japan treaty giving Japanese the
right to own land in the US. (2) The UN Charter requires nations to promote
human rights (including non-discrimination based on national origin). (3)
Treaties (such as the UN Charter) are part of American law and must be
observed. (4) Treaties do not supersede inconsistent local laws unless they
are self-executing. (5) To determine if a treaty is self-executing, one looks at
the intent of the parties. That is, for a treaty provision to be operative
without the aid of implementing legislation, it must appear that its authors
meant to prescribe a rule that, standing alone, would be enforceable in the
courts. (6) The US Constitution’s Fourteenth Amendment prohibits racial
discrimination.
EXPLANATION: The UN Charter provisions on human rights set out
goals and aspirations, not self-executing provisions. They were not meant to
become rules of law. This is in contrast to the rules in the Charter dealing
with rights and privileges of the officers and employees of the UN, which
signatories are required to observe. American states are bound to observe
the US Constitution. The California law, which is based on racial
discrimination, violates the US Constitution.
ORDER: The land does not escheat to California.

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 Chapter 1 Cases

Case 1-3. MATIMAK TRADING CO. v. KHALILY and D.A.Y.

KIDS SPORTSWEAR INC.
United States, Second Circuit Court of Appeals, 1997.
FACTS: Plaintiff, Matimak, a Hong Kong company, seeks to sue Khalily
and D.A.Y., two New York corporations, in a US federal court. Matimak
seeks to invoke the federal court’s diversity jurisdiction in US Code, title 28,
§ 1332(a)(2) to hear civil disputes between “citizens of a State and citizens
of a foreign state.” The district court dismissed plaintiff’s suit on the
grounds that it was not the citizen of a foreign State, because Hong Kong
was not at the time recognized as being a foreign state by the United States
government.
ISSUES: (1) Is Hong Kong a state? (2) Is Matimak a citizen of the United
Kingdom? (3) Does US Code, title 28, § 1332(a)(2) allow stateless persons
to sue in a US federal court?
HOLDINGS: (1) No. (2) No. (3) No.
LAW: (1) As a general rule, a foreign state is one that is formally recognized
by the US. A foreign territory may also be recognized as a de facto state, but
this requires some statement from the executive branch indicating that the
executive wishes for the courts to treat the territory as a state. (2) The law
under which a corporate entity is created establishes that entity’s nationality.
(3) Precedent and the plain language of § 1332(a)(2) require that an alien
bringing suit in a US federal court must be a citizen or national of a foreign
state.
EXPLANATION: (1) Hong Kong is not recognized as a foreign state and
the US State Department has told the court that the US executive does not
regard it as a state. (2) Matimak was created as a company according to
Hong Kong law. Even though this law is based on a UK law, that is not
enough of a connection with the UK to say that Matimak is a UK company.
(3) Precedent and the plain language of the § 1332(a)(2) exclude stateless
persons from bringing suits in US federal courts.
ORDER: District court’s dismissal of the suit is affirmed.

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 Chapter 1 Cases

Case 1-4. THE TRAIL SMELTER ARBITRATION

(United States v. Canada)
Canadian-United States International Joint Commission, Arbitral Tribunal,
1938 and 1941.
FACTS: A Canadian lead and zinc smelter at Trail, British Columbia, was
polluting the waters of the Columbia River that then ran into the state of
Washington. After negotiations between the US and Canada, the latter
agreed to refer the matter to an International Joint Commission. The
Commission’s Arbitral Tribunal awarded the US $350,000 in damages, but
did not order the smelter to cease operating. In 1941, the US sought to have
the operation of the smelter enjoined.
ISSUE: Can Canada be enjoined from causing harm to a US river?
HOLDING: Canada may be enjoined from polluting US rivers.
LAW: International law establishes that “A state owes at all times a duty to
protect other states against injurious acts by individuals from within its
jurisdiction.” In a case decided by the Federal Court of Switzerland between
two Swiss cantons, it enjoined the use of a shooting establishment that had
endangered the territory of the other. It said: “This right [sovereignty]
excludes ... not only the usurpation and exercise of sovereign rights [of
another state] ... but also an actual encroachment which might prejudice the
natural use of the territory and the free movement of its inhabitants.”
Cases decided by the US Supreme Court (which may by analogy be
applied in the international arena) have held that no state has the right to use
or permit the use of its territory in such a manner as to cause injury by fumes
in or to the territory of another or the properties or persons therein, when the
consequences are serious and the injury is established by clear and
convincing evidence.
EXPLANATION: Canada is responsible in international law for the
conduct of the Trail Smelter.
ORDER: Canada must undertake to stop the pollution caused by the smelter
at Trail, British Columbia.

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 Chapter 1 Cases

Case 1-5. COMMISSION OF THE EUROPEAN

COMMUNITIES V. FEDERAL REPUBLIC OF
GERMANY
Court of Justice of the European Communities, Case 274/87.
FACTS: Commission of the European Communities brought suit for a
declaration that Germany’s Meat Regulation, prohibiting the importation and
“marketing of meat products which contain ingredients other than meat,”
fails to fulfil Germany’s obligation under Article 30 of the EEC Treaty.
ISSUE: Do any of the justifications advanced by Germany allow the Meat
Regulation to be upheld as a valid restraint on trade?
HOLDING: No.
LAW: Import restrictions to protect human life and health are allowed “if
that objective cannot be achieved by measures less restrictive of intra-
Community trade.” Council Directive 79/112 allows Member States to have
“detailed rules for the labelling of foodstuffs offered for sale to the ultimate
consumer without pre-packaging” for purposes of consumer protection and
avoiding confusion. “[N]ational measures may not conflict with … the
fundamental principles of the Community—in this case of the free
movement of goods—unless they are justified by reasons recognized by
Community law.”
EXPLANATION: Germany’s explanations for the Meat Regulation are
rejected as not complying with its treaty obligations under Article 30 of the
EEC Treaty, which provides, “Quantitative restrictions on imports and all
measures having equivalent effect shall, without prejudice to the following
provisions, be prohibited between member States.”
ORDER: The declaration is made that Germany failed to fulfil its EEC
Treaty obligations under Article 30.

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Case 1-6. DE SANCHEZ v. BANCO CENTRAL DE

NICARAGUA
United States, Court of Appeals, Fifth Circuit, 1985.
FACTS: Mrs. Sanchez, the wife of the then foreign minister of the Somoza
government in Nicaragua, was the payee on a check issued by the Central
Bank of Nicaragua. Following the fall of the Somoza government, Mrs.
Sanchez was unable to cash the check because the new government put a
stop-payment order on it. Mrs. Sanchez than brought in suit to force the
Banco Central to honor the check (which was drawn on a US bank). When
the trial court dismissed Mrs. Somoza’s suit, she appealed.
ISSUE: May an individual who is a national of a foreign state sue an agency
of that foreign state in another state’s courts for an alleged contractual
breach?
HOLDING: No.
LAW: As long as a state injures only its own nationals, then no other state’s
interest is involved, and the matter is regarded in international law as a
purely domestic affair.
EXPLANATION: Government expropriation is not so universally abhorred
that its prohibition commands the general assent of civilized nations. This
doctrine rests on the fundamental principle that one state will not inquire
into the internal affairs of another, otherwise there might be no internal
matter that would not be immune from foreign scrutiny.
ORDER: Decision dismissing the case is affirmed.

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Case 1-7. LIBYAN AMERICAN OIL COMPANY (LIAMCO)

v. GOVERNMENT OF THE LIBYAN ARAB REPUBLIC
Dr. Sobhi Mahmassani, Sole Arbitrator, 1977.
FACTS: The Libyan American Oil Company’s (LIAMCO’s) oil concessions
in Libya were nationalized in 1973. When no compensation was received
(despite promises), LIAMCO took the matter to arbitration, seeking
compensation for its lost properties. Libya, meanwhile, informed all its
concessionaires that it rejected arbitration as an affront to its sovereignty and
it refused to participate in this proceeding.
ISSUE: Is a sovereign bound by its contractual commitments?
HOLDING: A sovereign is bound by its contractual commitments.
LAW: International law and Libyan law are similar in the sources of
authority they look to. Both recognize arbitration. Both recognize the
sanctity of contracts.
EXPLANATION: The concession agreement provided that the law of Libya
(not in conflict with international law) was to govern. Both international law
and Libyan law recognize statutes, custom, and equity as sources of law.
Customary international law recognizes that states can be bound to an
arbitration agreement (see the Convention creating ICSID for example).
Islamic law also recognizes arbitration (the Prophet Muhammad having
served as an arbitrator and having used arbitration to resolve a dispute
during his lifetime). Similarly, both systems of law recognize the sanctity of
contracts. International law obeys the Latin maxim pacta sunt servanda
(pacts are to be observed) and a tradition of the Prophet provides that
“Muslims are bound by their stipulations.” Islamic law also provides that
cancellation of a contract is not valid except by mutual consent.
ORDER: Libya had breached its concession contract. LIAMCO was
entitled to US $80,085,677 in damages.

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