Survey of 1993 Developments in International Law in Connecticut
| Pages | 222 |
| Publication year | 2021 |
68 CBJ 222. Survey of 1993 Developments in International Law in Connecticut
Continuing the trend described last year, (fn1) in 1993 there was less legislation relating to international matters, but more cases interpreting existing international legislation. Practitioners have begun to use this legislation, which was enacted primarily in the late 1980s and early 1990s, and this increased use is increasingly reflected in reported cases interpreting the legislation.
Part I of this article describes the 1993 Connecticut legislation and the recently ratified Convention on the Limitation Period in the International Sale of Goods. Part II is a discussion of five decisions of the Connecticut courts and the United States District Court for the District of Connecticut.
A. Limited Liability Company Act.
An 1892 German invention, the Gesellschalt mit beschrankter Haftung ("Gmbff'), arrived in Connecticut 101 years later as the limited liability company. The key concept is separation of limited liability from easy transfer of ownership, with its attendant problems of protecting public shareholders. The availability of two principal corporate forms, public and private, is now the norm in most of the world, including both Eastern and Western Europe (including England since 1985), Latin America, the Middle East and non-anglophone Asia and Africa. (fn2) Both enjoy limited liability similar to that of corporations
under our law, (fn3) but private companies are intended for more restricted ownership, comparable to that of partnerships. The 1972 accession of the United Kingdom to the European Economic Community led to the introduction of a version of this system in England. In England, the company whose shares can be traded readily is now a public limited company (plc), while the traditional "Limited" now refers to the entity with more restricted transferability.
Connecticut's Limited Liability Company Act, (fn4) which became effective on October 1, 1993, comes near the end of an extraordinarily rapid development in the United States: in 1989, only two states had statutes authorizing such companies, but now they are available in approximately forty. (fn5) Unlike the case of a limited partnership, no entity is generally liable for an LLC's debts and the members do not risk personal liability simply by participating in management. An LLC enjoys the limited liability characteristic of a corporation but, as an "unincorporated association" for federal tax purposes, can elect to be taxed on the same basis as a partnership. (fn6) Unlike an S corporation, (fn7) an LLC may have corporate and non-resident alien shareholders. The
LLC's tax and other advantages, together with the familiarity of the form to many foreign investors, make it an interesting option for foreign- or partially foreign-owned businesses.
Section 8(b) of the Act allows professionals "licensed or otherwise authorized by law in this state or any other jurisdiction" (fn8) to form limited liability companies. The language of this section tracks the amended Connecticut Professional Corporation Act. (fn9) This means that professionals from multiple jurisdictions can form a single LLC to practice in more than one jurisdiction. (fn10) So far, Connecticut appears to be unique among all the states in providing this explicit safe harbor provision for multi-jurisdiction professional practices.
B. An Act Concerning International Prisoner Transfers.
This is a very short act, which took effect on its passage. (fn11) Incarcerated citizens often prefer to spend their sentences in the prisons of their own country, particularly if the prison conditions in their own country are better than those where they were sentenced. The United States has concluded a number of prisoner exchange treaties, but these require implementing legislation, without which the Commissioner of Correction cannot release prisoners committed to his custody.
Section 1 allows the Commissioner to transfer consenting prisoners to the country of their nationality. Prisoners who prefer to spend their entire sentences in Connecticut are free to do so: no prisoners will be transferred against their will.
Connecticut courts sometimes impose indeterminate sentences, a concept unfamiliar or unacceptable to some foreign countries. Section 2 allows the Board of Pardons to set a determined date to facilitate the prison transfer if the prisoner has an indeterminate sentence.
C. 1974 Limitations Convention as Amended by 1980 Protocol.
The 1974 Convention on the Limitation Period in the International Sale of Goods (the "1974 Limitation Convention") and its 1980 Protocol (fn12) will come into force for the United States on December 1, 1994. (fn13) When they apply, the 1974 Convention and its Protocol will override (fn14) Section 2-725 of the Uniform Commercial Code. (fn15)
As an example of the problems these treaties address, suppose Seller, located in Connecticut, contracts to sell goods to Buyer, located in Country A. Seller ships directly to Buyer's customer in Country B. The goods are defective, but it takes Buyer's customer, behaving reasonably in the circumstances, 4 1/2 years to discover the defect. Seller is unwilling to correct the defect, because its one-year warranty period has expired. Buyer may have an action against Seller and Buyer's customer may have an action against Buyer or Seller or both, but in which court?
Such a suit probably cannot be brought in Connecticut, because there is a four-year statute of limitations for suits of this type. (fn16) Suppose the relevant limit is ten years in Country A and only two years in County B. If the plaintiff's "forum shopping" has been thorough enough to uncover these facts, he will try to take advantage of the law of Country A. Of the three countries, Country A seems to have the least to do with the facts, but perhaps it is the only jurisdiction in the world where the plaintiff may win his lawsuit. A system permitting such forum shopping is the opposite of the stability and predictability conducive to
efficient trade. Even leaving aside differences in substantive law, when the limitation period may be anything from six months to thirty years, (fn17) calculation of a company's financial exposure for breach of contract is impossible and insurance correspondingly expensive or unavailable. However, the problem is actually even more complex than that. Common-law countries usually treat the limitation period as procedural (fn18) and therefore are likely to apply their own statutes of limitation to lawsuits in their courts, even when the transaction, and even the substantive law governing the action, is in some other jurisdiction. Civil-law countries, on the other hand, usually consider that the appropriate limitation period should be selected according to the applicable choice-oflaw rules. Each forum uses its own choice-of-law rules (fn19) to determine the applicable law for this purpose.
Yet another level of complexity relates to "tolling" of the applicable statute of limitations. Under certain circurnstances. (fn20) the applicable statute of limitations is deemed not to have started running, or deemed no longer to be running, if it bad started to run. (fn21) The rules relating to tolling vary even more widely from jurisdiction to jurisdiction than do the limitation periods and, whereas the limitation periods are usually easy to find in the statutes, the rules on tolling are typically uncodified and may be much more difficult to find. Choice-of-law rules do not require the tolling rules to be taken from the same jurisdiction as the applicable limitation period, so the statute of limitations may be expanded or contracted in ways its drafters did not expect.
These problems were recognized in 1969 by the United Nations Commission on International Trade Law ("UNCITRAL"). The 1974 Limitation Convention was adopted by a diplomatic conference on June 14, 1974. It was amended by a Protocol in 1980 to make it conform to the United Nations
Convention on Contracts for the International Sale of Goods (also drafted by UNCITRAL). (fn22) The 1974 Limitation Convention came into force on August 1, 1988. It has received more attention since the CISG Convention was promulgated, but undoubtedly will receive even more attention after the United States becomes a party.
The 1974 Limitation Convention applies only to contracts for the sale of goods and not, for example, to product liability lawsuits. (fn23) It provides for a four-year limitation period and a comprehensive scheme of rules relating to tolling. It is intended to solve the forum shopping problem, by making the statute of limitations the same in all contracting countries.
A. Solomat Enterprises, Inc. v. Neotronics Technology PLC. (fn24)
Plaintiffs and Defendant contracted for Defendant to purchase Plaintiffs' instrument division in a complex...
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