Survey of 1998 Developments in International Law in Connecticut
| Publication year | 2021 |
| Pages | 349 |
73 CBJ 349. Survey of 1998 Developments in International Law in Connecticut
Last year, there were several interesting developments in Connecticut, (fn1) not all of them in judicial decisions. There were also significant developments in the (non-statutory) rules governing international arbitration and standby letters of credit.
The Connecticut Department of Economic and Community Development ("DECD") programs we mentioned last year (fn2) have grown to include representatives with offices in Argentina, Brazil, China, Israel, Mexico and South Africa. (fn3)
Through these representatives and other programs in the state, DECD provides advice, introductions and sometimes other forms of assistance to Connecticut companies seeking export markets or other international business activity. The Department's web site includes links to some key Connecticut statutes relating to international trade. (fn4)
From 1977 until recently, the United States stood alone in the world in making it a crime to bribe foreign officials in their own countries. Some of our country's exporters resented the advantage that seemed to be given to their competitors, some of whom (such as the Germans) could even take tax deductions for the "ordinary and necessary business expense" of bribery. One of us has had to listen several times to African lawyers patiently explaining that the extraterritorial reach of the Foreign Corrupt Practices Act (fn5) proved not only America's insufferable arrogance, but also its disregard for the fundamental principles of international law.
We don't see it as a violation of traditional international law to criminalize immoral and economically harmful foreign conduct of a country's nationals, but whether it is or not, international law can be changed by treaty. An important, early step in this direction is the 1996 Inter-American Convention Against Corruption, (fn6) which has been ratified by 16 countries (fn7) and signed, but not yet ratified, by 9 more. (fn8) Among the latter is the United States, where the opposition of Senator Helms is considered an insurmountable obstacle to the Senate's advice and consent to ratification at this time. (fn9) In 1997, the United Nations General Assembly provided an important impetus with its Declaration against Corruption and Bribery, in International Commercial Transactions, which called for criminalizing foreign bribery and denying tax deductibility of bribes. (fn10) Many U.N. entities now have anti-bribery programs, notably the Global Programme against Corruption established by the U.N. Centre for International Crime Prevention, the Office for Drug Control and Crime Prevention, the Interregional Crime and justice Research Institute, and the Programme for Accountability and Transparency of the United Nations Development Programme. There have been important initiatives also by the European Union (fn11 )and the Council of Europe. (fn12)
The most important recent step, however, is the 1997 OECD Convention on Combating Bribery of Foreign Public Officials, (fn13) which has been signed by all 29 members of the Organization for Economic Co-operation and Development and five other countries. This convention has been ratified by 15 countries, including the United States and such major trading countries as Belgium, Canada, (fn14) Germany, (fn15) Japan, Korea, the Netherlands and the United Kingdom. (fn16), (fn17) Among the other 18 signatories, (fn18) Austria, France and Sweden have adopted implementing legislation and may be expected to ratify it soon.
The United States implementing legislation is the International Anti-Bribery and Fair Competition Act of 1998, (fn19) which makes two major changes to the Foreign Corrupt Practices Act.(fn20) First, the jurisdictional reach of the statute has been extended to encompass not only bribes and other prohibited activities by U.S. citizens or entities, but also actions by foreign companies and citizens occurring within U.S. territory. (fn21) This nationality-based and territory-based jurisdiction increases the potential liability of U.S. corporations in some circumstances, such as foreign representatives offering bribes on behalf of their employers. Second, bribery of a government official is now a crime under the FCPA if the bribe is intended to secure any improper advantage. For example, bribing an official of a foreign regulatory agency to influence his decision on an environmental matter now has the same criminal status as bribing an official to obtain or to retain a government contract.
Banks in the United States ordinarily are not allowed to guarantee the obligations of their customers. (fn22) This gave the banks of other countries, which could do so, a competitive advantage until it was discovered that a letter of credit could be drafted to make the required document a statement that the customer had not fulfilled its obligations to the beneficiary, rather than the usual bill of lading, commercial invoice and so forth. (fn23) Indeed, this "standby" (because normally it is not intended to be drawn) letter of credit is widely considered superior to a traditional guaranty, because it does not provide the bank the traditional defenses of a guarantor. This led the banks of France and other countries to respond with the "first demand" guaranty, which ftinctions almost as simply as a standby letter of credit.
International commercial letters of credit almost always state that they are subject to the latest version of the rules published from time to time since 1933 by the International Chamber of Commerce, which at present is the Uniform Customs and Practice for Documentary Credits, 1993 revision, ICC publication no. 500. (fn54) Standby letters of credit usually say the same, but often add, "to the extent the same may be applicable." In both cases, it is important to keep in mind that these rules are not the law of any jurisdiction, but only terms incorporated by reference in the contract that is the letter of credit.
In 1978, the ICC published Uniform Rules for Contract Guarantees, ICC publication no. 325. These rules were little used, and may never have been used at all for demand guaranties, because they required a judgment or arbitral award as a condition to payment. The Uniform Rules for Demand Guarantees, published in 1992 as ICC publication no. 458, eliminated this requirement, but we continue to see demand guaranties issued by European banks that do not mention these rules and we have never seen a standby letter of credit that referred to them. There is also an UNCITRAL Convention on Independent Guarantees and Stand-by Letters of Credit, (fn25) which at this writing has been ratified by Ecuador, El Salvador, Kuwait, Panama and Tunisia and will enter into force between them on January 1, 2000. The only other signatories are Belarus and the United States, so even if we eventually ratify it, the immediate impact on international standby letters of credit will be minimal.
The Institute of International Banking Law & Practice, Inc., a not-for-profit corporation based in Maryland, developed a statement of International Standby Practices and secured its adoption 1998 by the ICC, which has issued it as ICC publication no. 590, effective January 1, 1999. These rules were drafted to be compatible with the UNCITRAL Convention. It is uncertain, however, whether and how soon the banks will switch from the Uniform Customs and Practice to the International Standby Practices for their standby letters of credit, because the new rules are complex and full of unfamiliar details. We find them a significant improvement in many ways, but with a substantial learning curve to climb, some bankers are likely to say, at least until they see competitors using the new rules, that the system is working well enough already and doesn't need to be fixed.
Although some U.S. litigators may be upset, we suspect most international arbitration lawyers in other countries were pleased to see the Second Circuit's decision, in National Broadcasting Company, Inc. v. Bear Steams & Co., Inc., (fn26) that 28 U.S.C. §1782, which authorizes United States courts to order testimony and production of evidence for use "in a proceeding in a foreign or international tribunal," does not apply to commercial arbitration under the auspices of nongovernmental organizations such as the International Chamber of Commerce. (fn27)
Two leading organizations conducting international arbitration recently updated their rules. For ease of reference, and because of their value to practicing international lawyers, we are reprinting the new texts as addenda to this article.
A. New ICC Rules
Based in Paris, France, (fn28)the International Chamber of Commerce ("ICC") has promoted arbitration as an important method of settling international business disputes since 1923. It is the leading organization conducting formal, structured arbitration under the supervision of an arbitration court. (fn29) The ICC periodically refines its arbitration rules, (fn30) the most recent version (fn31) having become effective on January 1, 1998. The revised rules are effective for arbitrations commenced after that date, even where the arbitration clause was executed earlier.
A detailed discussion is beyond the scope of this article, (fn32) but we note that the new version of the rules retains the concept of the terms of reference, which is a type of submission agreement drafted by the arbitral tribunal and executed by the parties (and the arbitral tribunal), (fn33) and that the chair of the arbitral tribunal can still make...
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