Amicus Curiae Brief — Hartford Fire Insurance v. California

Court, U.S.

FILED

NOV 19 1992

| OFFICE Of THE CLiR

|

Nos. 91-1111, 91-1128 eae

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1992

Hartford Fire Insurance Co., et al.; Merrett

Underwriting Agency Management Ltd., et al.,

Petitioners,

: Vv.

State of California, et al.,

Respondents.

On Writs of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE GOVERNMENT OF

CANADA AS AMICUS CURIAE

IN SUPPORT OF CERTAIN PETITIONERS*

Ot Counsel: DOUGLAS E. ROSENTHAL

GILLES H. LAUZON, QO.C. Counsel of Record

Department of Justice of Canada KAY C. GEORGI

DOUGLAS B. RUTZEN

COUDERT BROTHERS

1627 I Street, N.W.

Suite 1200

Washington, D.C. 20006

202) 775-5100

Counsel for the Government

of Canada Amicus Curiae

f j neide of the cov

This amicus brief is submitted in support of Petitioners

Merrett Underwriting Agency Management Limited, Three

Quays Underwriting Management Limited, Janson Green Man-

agement Limited, Murray Lawrence & Partners, D.P. Mann

Underwriting Agency Limited, Robin A.G. Jackson, Peter N.

Miller, Edwards & Payne (Underwriting Agencies) Limited, and

Sturge Reinsurance Syndicate Management -Limited.

e*

QUESTION PRESENTED

Did the Court of Appeals properly assess the extraterritorial

reach of the Sherman Act consistent with precedents and

international law when it held that a U.S. district court should

apply U.S. law to reach and punish the conduct of foreign

participants in a foreign reinsurance market acting legally pur-

suant to authority of the local sovereign but contrary to U.S.

law?

PARTIES TO THE PROCEEDING

This case involves complaints by nineteen states and nu-

merous private plaintiffs that were consolidated for pretrial

purposes by the judicial Panel on Multi-District Litigation in

MDL Docket No. 767.

Plaintiffs in the consolidated proceeding, who were also

appellants in the Court of Appeals for the Ninth Circuit, were:

States: The States of Alabama, Alaska, Arizona, California,

Colorado, Connecticut, Louisiana, Maryland, Massachusetts,

Michigan, Minnesota, Montana, New Jersey, New York, Ohio,

Pennsvivania, Washington, West Virginia, and Wisconsin.

State or Local Government Entities, Listed by State:

Alabama: City of Mobile; City of Birmingham.

California: City of Lafayette; City and County of San

Francisco: County of San Benito.

Louisiana: City of Baton Rouge; City of New Orleans; City

of Slidell; City of Nachitoches; City of Eunice.

Massachusetts: Town of Hanover: Town of Milford.

Montana: County of Teton.

New York: Roosevelt Island Operating Authority, Inc.,

Village of Croton; Village of Lake Success.

Ohio: Township of Jackson; County of Hardin.

Pennsylvania: County of Schuylkill; City of Altoona; City of

York; Borough ot Chambersburg.

Washington: County of Crowirtz.

West Virginia: City of Clay; County of Hancock; County of

Mineral; County of Wirt.

Private Plaintiffs: Big D Building Supply Corp.; Anastasios

Markos, T/A Municipal Exxon; Bay Harbor Park Homeowners

Ass'n, Inc.; Environmental Aviation Sciences, Inc.; Carlisle Day

Care Center, Inc.; Bensalem Township Authority; Keyboard

Communications, Inc.; Glabman Paramount Furniture Mig.

Co., Inc.; Les-Ray Bobcat, Inc.; Jerry Grant Chemical Associ-

ates, Inc.: Durawood, Inc.; Carmella M. “Boots” Liberto Trad-

ing as R.J. Liberto, Inc.; Henry L. Rosenfeld; Acme Corrugated

Box Co., Inc.; P&J Casting Corp.; Ace Check Cashing, Inc.

Detendants in the consolidated proceeding, who were also

appelices in the Ninth Circuit, were, beside Petitioners. the

following:

Allstate Insurance Company; Aetna Casualty & Surety

Company: CIGNA Corporation; General Reinsurance Corpora-

tion; Harttord Fire Insurance Company; Insurance Company of

North America: Insurance Services Office, Inc.; Reinsurance

Association of America; Thomas A. Greene & Company, Inc.;

Ballantyne, McKean & Sullivan Limited: C.J.W. (Underwriting

Agencies) Limited (sued herein as C.J. Warrilow-Hine &

Butcher, Ltd.); Lambert Brothers (Underwriting Agencics)

Limited (sued herein as J. Brian Hose & Others, Ltd.): R.K.

Carvill & Co., Ltd: Continental Reinsurance Corporation (U.K.)

Limited: Umonamerica Insurance Company, Ltd.; CNA Re

'U.K.), Ltd.: Kemper Reinsurance London, Ltd.; Constitution

Reinsurance Corporation: Mercantile & General Reinsurance

Company of America; Prudential Reinsurance Company; North

America Reimsurance Company; Winterthur Swiss Insurance

Company, Excess Insurance Company, Ltd.; Excess Insurance

Group, Ltd.. Terra Nova Insurance Company Limited.

tit

2

TABLE OF CONTENTS

INTEREST OF THE GOVERNMENT OF

CANADA

CUSTOMARY INTERNATIONAL LAW, WHICH

HAS BEEN ADOPTED AS U.S. LAW, PRE-

CLUDES ONE STATE'S EXERCISE OF ECO-

NOMIC REGULATORY JURISDICTION OVER

ACTS OCCURRING IN THE TERRITORY OF

ANOTHER STATE WHERE SUCH EXERCISE

WOULD CAUSE A SUBSTANTIAL CONPLICT .

A.

B.

International Law is a Part of U.S. Domestic

As 4 Matter of Customary International Law,

States do not Apply Their Economic Regulatory

Laws to Acts Committed by Foreign Persons

Within the Territory of a Foreign Sovereign

Where Such Application Would Conflict With

the Laws of the Foreign Sovereign......... ..

A Corollary Canon of Construction is That Ab-

sent a Clearly Expressed Intent to Override

International Law, a Statute Should not be

Construed To Ct S6 pee | Leet sect. s

"see eee ewreeeeeeweeee eee eee eeneeaeeeeeeeeene

a)

LABLE. OF CONTENTS — (Continued)

Pave

> this Court has Consistently Applied These

Principles to Read Statutes With Jurisdictional

Clauses Comparable to the Sherman Act to

Respect the Territorial Preference ...........

NETIHER THE PLAIN LANGUAGE NOK THE

LEGISLATIVE HISTORY OF THE SHERMAN

ACT DEMONSTRATES A CONGRESSIONAL IN.

TENT TO APPLY TT EXTRATERRITORIALLY SO

AS 10 CONFLICT WITH AND UNDERMINE

ANOTHER SOVEREIGNS TERRITORIAL

SMa caddaccendcdevedsiavdvarasdsantédedan’ se

NOK DOES THE FOREIGN TRADE ANTITRUST

IMPROVi-MENTS ACT OF 1982, AMENDING

THE SHERMAN ACT, EXPRESS AN INTENT TO

OVERRIDE THE TERRITORIAL PREFERENCE

IN SELL ATIONS OF LEGAL CONFLICT UNDER

L.S. AND INTERNATIONAL LAW .............

IN JHE TUNDRED YEARS OF JURISPRU

DENCE FOLLOWING PASSAGE OF THE SHER.

MEAN ACT, THIS COURT HAS NEVER UPHELD

SHERMAN ACT JURISDICTION OVER FOR,

b1GN PERSONS ENGAGED IN) PREDOMI.

NANTLY FOREIGN CONDUCT WHERE THE

PAERCISE OF SUCH JURISDICTION WOULD

DIRECTLY CONFLICT WITH THE LOCAL

LAWS AND POLICIES OF THE FOREIGN JU-

Pt Me + c\chunndes Sanomeckstannsevédonans

REPL DIATING THE TERRITORIAL PREFER.

ENCE ABSENT CLEAR LEGISLATIVE DIREC

HON 10 DO SO COULD INVITE FOREIGN

EX IRATERRITORIAT COUNTERMEASURES

VOAINST CLS. TERRITORIAL SOVEREIGNTY

| NDERMINING IMPORTANT US. INTERESTS

vi

iG

13

VI.

OONC LESION

LABLE OF CONTENTS ~— (Continued)

PYEN TE TEE DISTRICT COURT HAD JURIS

DICTION UNDER THE SHERMAN ACT 10

HEAR THESE CLAIMS, INTERNATIONAL LAW

\S EMBODIED IN U.S. LAW REOUIRES THAT

It REERAIN FROM DOING SO. ...............

\. A Direct Conthet of Law Poses a Fundamental

Jurisdictional Issue and Cannot be

Balanced

ove wp eoweeeevoeeveeeeeevoeeveeaeaeeeeaeaeaenenee

Bb. Ata Minimum, Sovereign Regulatory Conflicts

Must be Accorded Substantially Greater Weight

lhan Other bactors in a Conthet Of Laws

Ps chudetewkéertocdcedhewueecelcects

vi

Pape

1%

1%

TABLE OF AUTHORITIES

Page

United States Cases:

Alexander Murray v. Schooner Charming Betsy, 6 U.S. (2

CD OR Pa o.oo 6 6c ero ddeeseseesceceecesss )

American Banana Co. v. United Fruit Co., 213 U.S. 347

(ns ccc kcaknddde ec caensewancedaeusuekasasee’s 13

Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398

nic 8.404086 6006 FOR NCU EERE RESE RECOV ESS EES 7

Benz v. Compania Naviera Hidalgo, S.A., 353 U.S. 183

Scns dwatd oncscdedkuskakckaeseieuesenewesss 11

Continental Ore Co. v. Union Carbide & Carbon Corp.,

. ee rrr rere rere 16

Diggs v. Shultz, 470 F.2d 461 (D.C. Cir. 1972), cert.

SE GES Wis le PA Ohh nd bvecedausiseces )

E.E.O.C. v. Arabian American Oil Co., __ U.S. .

Hk @ aoe. of ee Pee ere 11,12,13

Foley Bros. v. Filardo, 336 U.S. 281 (1949) ...........-. 10

In Re Insurance Antitrust Litigation, 938 F.2d 919 (9th

Cty BE go dolor cde eve és cause e6bseueeeuaeres 4

In Re Insurance Antitrust Litigation, 723 F.Supp. 464

oo RE eer ore 3,4

Laker Airways v. Sabena, Belgium World Airlines, 731

ee a cece weer eeRebednee ee 19

Lujan v. Defenders of Wildlife, USS. , 1128. Ct.

Sc Po ead ace 8e ene 65 6 ekedns.nes 12

McCulloch v. Sociedad Nacional, 372

St. ees eckscbeceneceosncievanes 11,13,18,19

New York Central R.R. Ce. v. Chisholm, 268 U.S. 29

Gs denen 3600 6600n4eecek oes sbecenaeuaes 12,13

vill

TABLE OF AUTHORITIES — (Continued)

Page

Société Internationale Pour Participations Industrielles et

Commerciales v. Rogers, 357 U.S. 197 (1958) ....... 19

Société Nationale Industrielle Aerospatiale v. U.S. Dist.

Court §.D. Iowa, 482 U.S. 522 (1987).............. 9,10

Steele v. Bulova Watch Co. , 344 U.S. 280 (1952) ........ 12

The Paquete Habana, 175 U.S. 677 (1900) .............. 5,6

The Schooner Exchange v. M’Faddon, 11 U.S. (7 Cranch)

Ora a tn emer oe On Aes Mearns 7

United States v. Alvarez-Machain, __U.S.__, 112 S. Ct.

SE I x4 aka e hud ck dite coueeceensuekcchawan 9

United States v. Aluminum Co. of America, 148 F.2d 416

Ps CPN Sanh coeene cs iecinneeadeuncecakiks 16

United States v. Sisal Sales Corp. , 274 U.S. 268

SU + Ababbd 66s Fetheene de hdnakid Oban keeeceee 15,16

W.S. Kirkpatrick v. Environmestal Tectonics Corp. , 493

i Ss Sucalichulcavacecesonucascewee 13,14

Foreign Cases:

Asylum Case (Columbia v. Peru), [1950] 1.C.J. Rep. 266 6

British Nylon Spinners, Ltd. v. Imperial Chemical Indus-

tries, Ltd. , [1952] 2 All E.R. 780 (CA.)............ 8

Compagnie Europeene des Petroles S.A. v. Sensor Neder-

land B.V., 22 1.L.M. 66 (Hague Dist. Ct. 17 Sept.

SPUN Es 0840 opudbs nbbaden cece das be secbieceneneds 9

Daniets v. White and The Queen, [1968] S.C.R. 517

(eupoamme Coust of Caneel) . oo. cccccccccccccccsces 9

Frischke et al. v. Royal Bank of Canada et al. [1977], 80

Dominion Law Reports (3d) 393 (Ontario C.A.)..... 7

ix

TABLE OF AUTHORITIES — (Continued)

Page

Gordon v. Regina in Right of Canada, [1980] 5 W.W.R.

668 (British Columbia Supreme Court), aff'd [1980] 6

W.W.R. 519 (British Columbia C.A.)........--++5:-

Hachette Booksellers S.A. et al. v. Cooperative Buying and

Distribution Assoc. of Tobacco and Newspaper

Merchants et. al., [1967] Arréts du Tribunal Fédéral

93 If 192 (Supreme Court of Switzerland)........ a

The Jumbunna Coal Mine No Liability v. The Victorian

Coal Miners’ Association, (1908) 6 Commonwealth

Law Reports 309 (High Court of Australia) .......-..

A.M. Luther v. James Sagor & Co., {1921] 3 K.B. 532

ee cs oss eehaee ane nena senses eeeeenesuaeess

Mortensen v. Peters, [1906] 43 Scottish Law Reporter 872

~~ (Scottish Court of Justiciary)...........0e ee eee eee

Ref. Re Exemption of U.S. Soliders from Canadian Crim-

~ inal Courts, [1943] Supreme Court Reports 483 (Su-

preme Court of Canada) ........---- eee eee eee eees

Regina v. Kevyn, [1876] 2 Ex. D. 63 .......000 222 eee eee

Société Fruchauf Corporation v. Massardy et autres,

[1968] Recueil Dalloz Sirey-Jurisprudence 147; Ga-

zette du Palais 1965.2.86 (Court of Appeal, Paris) ...

Triquet v. Bath, [1764] 3 Burr 1478; 97 E.R. 936 (K.B.) .

Trendex Trading Corporation v. Central Bank of Nigeria,

[1977] O.B. 529 (C.A.) 2... cece eee eee eee eee eee

In re Westinghouse Uranium Contract, [1978] A.C. 547

(Judicial Committee of Privy Council) .........----

In re Wood Pulp Cartel: Ahlstrém Osakeyhtio v. EC

Commission [1988] 4 C.M.L.R. 901 (EC Court of

I no SSSA CREME SOS ESEECETS

TABLE OF AUTHORITIES — (Continued)

Page

Legislative Materials:

Be SPO Boudin iui seaesscecei ee ee 13

er ION 6 och saute ntauiic Gis kncucuedccuaucloce. 14

H.R. Comm. on the Judiciary, H.R. Rep. No. 97-686, 97th

RM er OL BP PUD 6 6b sooo webewaccneen cnn 15

OM, Cm, OP TID oooh kk oc doc dc dcccnccccacs 13

GE MIs Is NE ir 13

Other Authority:

Article 38(1) of the Statute of the International Court of

Pa Wadia etcevensicl re eek 6

Article 10 of the Italian Constitution of 27 December

OW ciated coeeeeenhU hes tae cee ee 6

James R. Atwood & Kingman Brewster, Antitrust and

American Business Abroad 166 (2d ed. iS coon. 3 18

Basic Law (Grundgesetz) of Germany, Article 25......... 6

F.A.R. Bennion, Statutory Interpretation, § 130 (2d ed.

PME we acne keene hee ee ee 10

Brief Amicus Curiae of the Federal Republic of Germany,

Sterling Drug Inc. v. Baver AG, et al. , Nos. 92-7920

and 92-7970 (2nd Cir. filed Oct. 29, 1992) .......... 8

Brief tor the United States as Amicus Curiae in Support of

Petition for Certiorari in Matsushita Electric Indus-

trial Co. Ltd. v. Zenith Radio Corp., No. 83-2004... 17

1. Brownlie, Principles of Public International Law 287 (4th

By Wiens bs catannecs cdasednddoseacio<icl ck. 6

P-A Cote, The Interpretation of Legislation in Canada (2d

Oe Mass chevce eu ruedntaciees okt cere ocaecine 9,10

XI

TABLE OF AUTHORITIES — (Continued)

Page

Diplomatic Note from the Canadian Embassy to the U.S.

Department of State dated July 7, 1982.......----- 7

Dreidger, The Construction of Statutes, 166 (1974)...... 10)

Export Administration Act, 50 U.S.C. App. § 2407 et seq.

1. Se Prery reer ee ey Se tg 17,18

The Extraterritorial Application of National Laws (Lange ;

& Bore, eds. 1967) 2c cccccccsccccscvcsccsccscees

Henkin, “International Law as Law in the United States,” ‘

82 Mich. L. Rev. 1555 (1984) ..........cececceees

P. St. J. Langen, Maxwell On The Interpretation of

Sets GS CUE 66 6.0 cus eae cdaencuveseunceuess 1]

A.V. Lowe, Extraterritorial Jurisdiction (1983) ......... 7

Andreas Lowenfeld, Trade Controls for Political Ends .

SE vcckbecddvacekonysdnccustacdtiteteseeee ns

F. Morgenstern, “Judicial Practice and the Supremacy of

International Law” [1950] 27 BYBIL 42............ 6

J.S. Stanford, “The Application of the Sherman Act to

Conduct Outside the United States: A View From

Abroad.” Cornell Int’l. L.J. 195 (1978)...........-. 17

1979 Swedish Act on Prohibition of Investments in South

Africa and Namibia, Swed. Stat. 1979: 487 ......... s

Swedish Ministry of Commerce, Prohibitions of Invest-

ments in South Africa and Namibia 50 (1979) ....... §

Xl

Nos. 91-1111, 91-1128

es

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 199?

Harttord Fire Insurance Co., et al.; Merrett

Underwriting Agency Management Ltd., et al..

Petitioners,

Vv.

State of California, et al.,

Respondents.

On Writs of Certiorari to the United States

Court of Appeals for the Ninth Circuit

BRIEF OF THE GOVERNMENT OF

CANADA AS AMICUS CURIAE

IN SUPPORT OF CERTAIN PETITIONERS

THE INTEREST OF THE GOVERNMENT OF CANADA

The Government of Canada is subnfitting this brief” in

Support of certain named petitioners in Merrett Underwriting

Limited et al. v. State of California et al. because the law as

found in the decision below threatens important and legitimate

Canadian legal, commercial and economic interests. In particu-

lar, Canada is concerned with the exercise of U.S. extraterrito-

rial jurisdiction where it directly conflicts with the exercise of

Canada’s territorial jurisdiction.

*Pursuant to Rule 37 of this Court, the parties have supplied written

consents to the filing of this brief. The consents are filed with the Clerk of the

Supreme Court.

y

Canada relies on the amicus curiae brief of the Government

ot the United Kingdom to address other Canadian difficulties

with the balancing procedure undertaken by the Ninth Circuit.

In particular, Canada is concerned that the holding relating to

the significance of certain parties being British subsidiaries of

U.S. corporations is contrary to U.S. and international law,

which provides that a corporation is a national of the country of

its organization.

Although the question presented refers to the proper

assessment of the extraterritorial reach of the Sherman Act,

consistent with U.S. precedents and with relevant principles of

international law, Canada’s concern does not arise solely in the

field of antitrust. Relatively recent decisions by lower U.S.

courts, not reviewed by this Court, have adversely affected

Canadian interests in several fields by imposing U.S. law on

Canadian citizens for conduct within Canada despite the fact

that Canadian authorities had either approved or directed

contrary conduct, or had exercised what the Government of

Canada deemed to be exclusive Canadian regulatory jurisdic-

tion. The decision of the Court of Appeals for the Ninth Circuit

in Merrett Underwriting Agency Management Limited et al. v.

State of California et al. could lead to further adverse effects in

other areas of economic activity.

Canada’s concern does not lie with the tradition in U.S.

antitrust enforcement whereby U.S. jurisdiction reaches some

persons and conduct that are extraterritorial to the United

States. Where Canadian law and policy applied in Canada are

compatible with U.S. extraterritorial enforcement, no conflict

need arise. Both Canada and the United States are committed to

a policy of generally promoting competition and consumer

welfare.

In view of the extensive economic links between our two

countries, the Government of Canada has an interest in the

application of the laws of the United States in a manner

consistent with relevant principles of international law. Canada,

like the United States, has a long-standing interest in the

development and application of international law. The Govern-

ment of Canada may be able to assist this Court, as it reviews the

3

decisions below, in its consideration cf the relevance of custom-

ary international law to what appears to Canada, respectfully, as

a clear embodiment of these principles in U.S. law.

STATEMENT OF FACTS

The Government of Canada is submitting this amicus brief

with respect to only one of the two cases the Court has decided

to hear, Merrett Underwriting Agency Management Limited et

al. v. State of California et al. (“Merrett”). As more fully

explained in the Statement of Facts by the Government of the

United Kingdom in its brief amicus curiae, Petitioners in

Merrett (“Petitioners”) are participants in reinsurance and re-

trocessional reinsurance markets in England. Petitioners are

here seeking to overturn only three of about a dozen claims

brought against some or all of them for alleged anticompetitive

conduct undertaken virtually exclusively in the United King-

dom. No view is expressed on the law or merits of these

remaining claims. Unlike the other claims asserted, which

involve both U.S. and English defendants, these claims involve

only English defendants, the Petitioners.

Under these three claims, Petitioners are alleged to have

agreed to restrict the scope of reinsurance and retrocessional

reinsurance written in England, primarily in the Lloyds market,

and to have further agreed to refuse to offer such reinsurance for

policies insuring certain identified unacceptably high risks in the

United States.' Respondents allege that these agreements,

whatever their business justification and whatever the delega-

tion of authority under English law to these Petitioners to

pursue these commercial goals, are violations of Section 1 of the

Sherman Act. For purposes of this Court’s review of a summary

judgment motion, Respondents’ claims must be deemed to be

1. For the purposes of this appeal, the Government of Canada takes as

given Judge Schwarzer’s conclusion that the London reinsurance markets have

a direct and substantial interest in maintaining their financial viability, which

is at risk, as a part of the framework of English reinsurance market regulation

by collectively limiting the overseas risks which their members assume

pursuant to authority delegated by the Parliament of England. /n Re Insurance

Antitrust Litigation, 723 F. Supp. 464, 490 (N.D. Cal. 1989).

4

true. [he Government of Canada takes no position as to whether

these claims are factually correct or whether other relevant facts

might be adduced if this litigation proceeded.

' The district court declined to exercise jurisdiction over

these three claims against Petitioners based on considerations of

international comity. The district court recognized that Petition-

ers are foreign participants in a foreign market governed by the

laws and traditions of a foreign sovereign, and concluded that:

enforcement of the antitrust laws against activities in

the London reinsurance market would lead to signifi-

cant conflict with English law and policy. This conflict,

unless outweighed by other factors in the comity anal-

ysis, is itself sufficient reason to decline the exercise of

jurisdiction.

Id. at 489. After considering the other factors in a comity

analysis, the district court concluded that this conflict precluded

the exercise of U.S. antitrust jurisdiction.

When these claims were appealed to the Court of Appeals

tor the Ninth Circuit, the British Government formally notified

the Ninth Circuit of this direct conflict in an amicus brief. In its

opinion, the Ninth Circuit recognized that:

(t]he district court found that application of the antitrust

laws to the London reinsurance market “would lead to

significant conflict with English law and policy. “ The

British [Government's amicus curiae] brief reiterates

that conclusion: we do not doubt its accuracy.

In Re Insurance Antitrust Litigation, 938 F.2d 919, 933 (9th Cir.

1991) (citation omitted). Nonetheless, it reversed the district

court’s decision. In essence, the Ninth Circuit held that where

a “direct, substantial, and reasonably foreseeable effect” on U.S.

commerce is shown, not even a direct conflict with the law of a

foreign sovereign operating in its own territory can overcome

the presumption of U.S. antitrust jurisdiction. /d.

SUMMARY OF ARGUMENT

Established United States law follows and applies interna-

tional law and should lead to reversal of the decision below. No

5

comity balancing analysis is required. Absent a clearly expressed

intent to the contrary, U.S. law follows customary international

law in that a state should not apply its economic law to regulate

conduct by persons located in a foreign territory where doing so

directly conflicts with and undermines the law of the foreign

territorial sovereign. This principle is established in interna-

tional law, is the law of the United States, and has been

consistently applied by this Court in several cases involving

Statutes with jurisdictional clauses analogous to that of the

Sherman Act. The Sherman Act, as amended, and 100 years of

Supreme Court decisions interpreting it express no inteat to

depart from this principle. Repudiating it here would be an

unwarranted departure from an unbroken tradition of jurispru-

dence in the Supreme Court of the United States and in other

major states. Following this tradition preserves the extraterrito-

rial application of U.S. antitrust law, or the effects doctrine

generally, except where to do so is to undercut the ability of

another sovereign state to regulate conduct in its own territory.

ARGUMENT

I. CUSTOMARY INTERNATIONAL LAW, WHICH HAS

BEEN ADOPTED AS U.S. LAW, PRECLUDES ONE

STATE’S EXERCISE OF ECONOMIC REGULATORY

JURISDICTION OVER ACTS OCCURRING IN THE

TERRITORY OF ANOTHER STATE WHERE SUCH

EXERCISE WOULD CAUSE A SUBSTANTIAL CON-

FLICT.

A. International Law is a Part of U.S. Domestic Law.

International law is the law of the United States. The

Paquete Habana, 175 U.S. 677, 700-02 (1900).*

2. “International law is part of our law, and must be ascertained and

administered by the courts of justice of appropriate jurisdiction as often as

questions of right depending upon it are duly presented for their determina-

tion. See generally, Henkin, “International Law as Law in the United States,”

82 Mich. L. Rev. 1555, 1561 —67 (1984). Customary international law is also

part of Canadian law. Ref. Ke Exemption of U.S. Forces from Canadian

Crominal Courts, (1943) S.C.R. 483 (S.C.C.) at $16, per Taschereau J. Other

sovereigns similarly incorporate international law into domestic law. Triquet v.

Bath |1764) 3 Burr 1478, 97 E.R. 936 (K.B.) at 938 per Lord Mansfield C.J.:

Trendex Trading Corporation v. Central Bank of Nigeria [1977] QB $29, 554,

6

B. As a Matter of Customary International Law, States

do not Apply Their Economic Regulatory Laws to Acts

Committed by Foreign Persons Within the Territory

of a Foreign Sovereign Where Such Application

Would Conflict With the Laws of the Foreign Sover-

eign.

Customary international law? confers a general principle of

territorial preference in cases of conflicting concurrent jurisdic-

tion between one sovereign applying its law within its territory

and another sovereign applying its law extraterritorially to

command conduct within the other state’s borders (“The Terri-

torial Preference”).4

The United States recognizes both sovereign equality and,

correspondingly, The Territorial Preference. For example, in

NOTES (Continued)

per Lord Denning MR (C.A.): Basic Law (Grundgesetz) of Germany, Article

25: Article 10 of the Italian Constitution of 27 December 1947. See generally,

F. Morgenstern, “Judicial Practice and the Supremacy of International Law,”

[1950] 27 BYBIL 42, 61 ‘discussing supremacy of international law in France,

Switzerland, Greece, the Netherlands, Belgium, Denmark and Austria.)

3. International law is derived generally from the following sources:

‘4) international conventions, whether general or particular, estab-

lishing rules expressly recognized by the contesting states;

‘b) international custom, as evidence of a general practice accepted as

law:

(c) the general principles of law recognized by civilized nations;

id) .. . judicial decisions and the teachings of the most highly

qualified publicists of the various nations, as subsidiary means for the

determination of rules of law.

Article 38/1) of the Statute of the International Court of Justice. Customary

international law is evidenced by state statutes and practice, official statements

of policy, and the works of eminent jurists and commentators. The Paquette

Habana, 175 U.S. 677, 700—02 (1900). State practice attains the level of

customary international law where it is followed out of a sense of legal

obligation (opinion juris sive necessitatis). Asylum Case (Columbia v. Peru),

[1950] 1.C.J. Rep. 266, 277.

4. See, e.g., 1. Brownlie, Principles of Public International Law 287 (4th

ed. 1996) ("The sovercignty and equality of states represents the basic

constitutional doctrine of the law of nations .. . . The Principal corollaries of

the sovereignty and equality of states are: (1) a jurisdiction, prima facie

exclusive, over a territory... : (2) a duty of non-intervention in the area of

exclusive jurisdiction of other states . . .”).

a

/

The Schooner Exchange v. M’Faddon, 11 U.S. (7 Cranch) 116,

136 (1812), this Court recognized the “perfect equality and

absolute independence of sovereigns.” Similarly, in Banco

Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423 (1964), this

Court noted that “the concept of territorial sovereignty is so

deep seated, [that] any state may resent the refusal of the courts

of another sovereign to accord validity to acts within its territo-

rial borders.’

Following customary international law, Canadian courts do

not generally apply Canadian or provincial law where applica-

tion would displace or undermine the laws or established

policies of another state or province effective within the latter's

territory. See, e.g., Frischke et al. v. Royal Bank of Canada et

al. [1977], 80 D.L.R. (3d) 393 at 404 (Ontario C.A.) (courts

Should not take such action as would cause violation of the laws,

or circumvention of the procedures, of a friendly nation).

Judicial decisions and official statements in the United King-

dom, Australia, Sweden, Switzerland, Germany, France, and

the Netherlands, constituting state practice and accepted as a

5. When the United States has failed in the past to comply with The

Territorial Preterence, foreign states have protested the U.S. action. For

example, in response to the U.S. extraterritorial application of Siberian

pipeline trade controls, the foreign ministers of the twelve European Com-

munitics Member States responded, “This action, taken without consultation

with the Community, implies extraterritorial extension of US jurisdiction,

which in the circumstances is contrary to international law.” The Extratern-

torial Applwation of National Laws 19 (Lange & Born, eds. 1987), citing

Statement of the Foreign Ministers of the European Communities, 23 June

1982. See also Diplomatic Note from the Canadian Embassy to the U.S.

Department of State dated July 7, 1982 regarding the Siberian pipeline trade

controls (noting that the U.S. assertion of jurisdiction in that case was

“incompatible with the principles of self-restraint and non-interference that

underlie the international order.”); Comments of the European Community on

the Amendments of 23 June 1992 to United States Export Administration

Regulations, reprinted in A.V. Lowe, Extraterntonal Jurisdiction 200, 201

(1983). (“The United States measures as they apply in the present case are

unacceptable under international law because of their extraterritorial

aspects.). These concerns are not with U.S. extraterritoriality generally. The

EC applies its competition law to reach foreign conduct by forcign parents of

EC subsidiaries. See In re Wood Pulp Cartel: Ahistrim Osakeyhtio v. EC

Commission [1988] 4 C.M.L.R. 901 (EC Court of Justice)

S

matter ot obligation, reveal that these states also recognize The

Territorial Preterence.°

6. The tollowing are supporting precedent in these jurisdictions:

United Kingdom: 4M. Luther v. James Sagor & Co. , [1921] 3 K.B. 532 at

S48 (C.A.) (Tt is well settled that the validity of the acts

oan independent sovereign government in relation to

property and persons within its jurisdiction cannot be

questioned in the Courts of this country”); Jn re

Hestinghouse Uraniun Contract, [1978] A.C. $47 (Ju-

dichal Commuttee of the Privy Council) (letters rogatory

by U.S. court not given effect to extent they conflicted

with British and EC law), British Nvlon Spinners, Ltd.

Imperial Chemical Industries, Ltd. , [1952] 2 All E.R.

“SOCAL, (court woud not recognize and enforce U.S.

court order where to do so “would destroy or “qualify

those statutory rights belonging to an English national”

Who was not subject to U.S. jurisdiction).

Australia: lhe Jumbunna Coal Mine No Liability v. The Victorian

Coal Miners’ Association, [1908] 6 Commonwealth Law

Reports 309 at 363 (High Court of Australia) (statutes

are always read as being prima facie restricted in their

operation within territorial limits”).

Sweden: 1974 Swedish Act on Prohibition of Investments in

South Atrica and Namibia, Swed. Stat. 1979; 487; Swed-

ish Ministry of Commerce, Prohibitions of Investments

in South Atrica and Namibia SO (1979) ("In the event of

collisions ot laws, however, the basic principle, accord-

ing to international law, must be not to coerce one’s own

legal subjects, when they are under the territorial

jurisdiction of a foreign state, to actions incompatible

with the legal system of that state.”).

Switverland: Hachette Booksellers S.A. et al. v. Cooperative Buying

und Distribution Assoc. of Tobacco and Newspaper

Verchants et al., [1967] Arréts du Tribunal Fédéral 93 1

142 (Supreme Court ot Switzerland) (Federal cartel act

mitted to Swiss territory).

Germanys: Brict Amicus Curiae of the Federal Republic of Ger-

many, Sterting Drug inc. v. Bayer AG, et al., Nos.

12-7920 and 92-7970, 8 (2nd Cir., filed Oct, 29, 1992)

[he extraterritorial aspects of the [trademark and trade

name} Injunction constitute a substantial and unwar-

ranted interference with Germany's sovereign right to

regulate activities within its territory.”)

9

C. A Corollary Canon of Construction is That Absent a

Clearly Expressed Intent to Override International

Law, a Statute Should not be Construed To Do So.

Framed by international law, the corresponding canon of

construction in the United States is that “an Act of Congress

ought never to be construed to violate the law of nations if any

other possible construction remains”. Alexander Murray v.

Schooner Charming Betsy, 6 U.S. 64, 116, 2 Cranch 64, 118

(1804) (Marshall, C.J.).

Canadian courts also construe statutes, if another reading is

possible, not to violate international law. See, e.g., Daniels v.

White and The Queen, |1968] S.C.R. 517, 541 (Supreme Court

ot Canada) per Pigeon J.; P-A Coté, The Interpretation of

Legislation in Canada 308-09 (2d ed., 1991). The United

Kingdom, as well as many other states, also follow this rule. See,

e.g., Mortensen v. Peters [1906] 43 Scottish Law Reporter 872,

877 (Scottish Court of Justiciary) per Lord Kyllachy.

Statutes and treaties manifesting clear Congressional intent

to override international law are the only exceptions to this rule.

See Diggs v. Shultz, 470 F.2d 461 (D.C. Cir. 1972), cert. denied,

411 U.S. 931 (1973) (upholding statute permitting imports

contrary to United Nations Security Council embargo). Accord,

United States v. Alvarez-Machain, ___ U.S. _—___ 112 S. Ct.

2188 (1992) (treaty terms do not necessarily embody customary

international law); Société Nationale Industrielle Aerospatiale v.

U.S. Dist. Court S.D. lowa, 482 U.S, 522 (1987) (construing the

France: Societe Fruehauf Corporation v. Massardy et autres,

[1968] Recueil Dalloz Sirey-Jurisprudence 147; Gazette

du Palais 1965.2.86 (Court of Appeal, Paris), translated

in Andreas Lowenteld, Trade Controls for Political Ends

%3 (1983); id. at 99 (general principles of international

law dictated that French company in France not subject

to extraterritorially applied U.S. trade laws).

Netherlands: Compagnie Europeene des Petroles S.A. v. Sensor Ne-

derland B.V., 22 1.L.M. 66 (Hague Dist. Ct. 17 Sept.

1982) (extraterritorial scope of U.S. Siberian pipeline

regulations to countermand law and policy in the Neth-

erlands incompatible with territorial principle under

international law).

10)

Hague Evidence Convention as permitting a court not to

employ the Convention before seeking and compelling discov-

ery under the Federal Rules of Civil Procedure).

This exception is followed not only in the United States but

in other jurisdictions as well. See, e.g., Gordon v. Regina in

Right of Canada, [1980] 5 W.W.R. 668, 671 (British Columbia

Supreme Court), aff'd [1980] 6 W.W.R. 519 (British Columbia

C.A.) (upholding jurisdiction over U.S. citizen fishing in 200-

mile Canadian “fishing zone.” “[E]ven if the law of Canada

contravenes ‘customary international law,’ if Parliament, as

here, has acted unambiguously, the courts of this country are

bound to apply the domestic law.”) See also Mortensen v.

Peters, 43 Scottish Law Reporter 872, 877 (Scottish Court of

Justiciary) (for expression of same exception in U.K jurispru-

dence).

D. This Court has Consistently Applied These Principles

to Read Statutes With Jurisdictional Clauses Compa-

rable to the Sherman Act to Respect The Territorial

Preference.

A second, and related, canon is that statutes should not be

construed to apply extraterritorially to conflict with foreign local

law, absent a clearly expressed legislative purpose to the

contrary. This is not only the law in the United States,’ but in

such other states as Canada and the United Kingdom.*

7. Foley Bros. v. Filardo, 336 U.S. 281, 286 (1949) (refusing to apply the

U.S. Eight Hour Law to a contract between the United States and a private

contractor for construction work in the Middle East because Congress had not

expressed a clear purpose to regulate labor conditions which are the primary

concern of foreign jurisdictions).

S. For Canadian law see, e.g., Driedger, The Construction of Statutes

166 (1974) (“There is a presumption that, in the absence of an intention clearly

expressed or to be inferred from its language, or from the object or subject

matter or history of the enactment, a legislature does not design its statutes to

operate extraterritorially.”); P-A Coté, The Interpretation of Legislation in

Canada 17) (2d ed. 1991) (“Unless it is implicitly or explicitly provided

otherwise, the legislator is presumed to enact for persons, property, judicial

acts and events within the territorial boundaries of his jurisdiction.”). For U.K.

law see, e.g., Regina v. Keyn, [1876], 2 Ex.D. 63 (unless express assertion of

authority otherwise, jurisdiction is territorial); F.A.R. Bennion, Statutory

interpretation, § 130 at 263 (2d ed. 1992) (“Unless the contrary intention

11

This principle has been consistently applied in the United

States to statutes having jurisdictional clauses similar to that of

the Sherman Act. It limits the jurisdiction of those statutes over

foreign conduct by U.S. and foreign persons which could cause

conflict between sovereign regulatory regimes.

In McCulloch v. Sociedad Nacional, 372 U.S. 10 (1963),

this Court refused to construe the words “between any foreign

country and any State, Territory or the District of Columbia”

(i.e., foreign commerce) in the National Labor Relations Act

(“NLRA”) to extend to the maritime operations of foreign

flagships employing a foreign crew, even though the Honduran

corporation which operated the ships was controlled by the

United Fruit Company, a New Jersey corporation, owned by

U.S. citizens, and the ships transported fruit between Central

and South America and the United States. The Court specifically

recognized the “possibility of international discord” that could

result from the concurrent, and possibly contradictory, applica-

tion of the NLRA and the Honduran Labor Code. The Court

concluded that in order “to sanction the exercise of local

sovereignty under such conditions in this ‘delicate field of

international relations there must be present the affirmative

intention of Congress clearly expressed.’”®

Last year, this Court once again affirmed this “clear expres-

sion” rule in E.E.0.C. v. Arabian American Oil Co.

(“Aramco”), ——S—- U.S. — __, LA S.Ct. 1227 (1991) (Title VII of

the Civil Rights Act of 1964 held not to apply extraterritorially to

regulate the employment practices of U.S. employers who

appears, and subject to any relevant rules of private international law, an

enactment ts taken not to apply to foreigners and foreign matters outside the

territory to which it extends.”); P. St. J. Langen, Maxwell on the Interpreta-

tion of Statutes 171 (12th ed. 1969) (“In the absence of an intention clearly

expressed or interred either from its language, or from the object or subject-

matter or history of the enactment, the presumption is that Parliament does

not design its statutes to operate on its subject beyond the territorial limits of

the United Kingdom.”)

9. Id. at 21-22, quoting Benz v. Compania Naviera Hidalgo S.A., 353

U.S. 138, 147 (1957) (holding that the Labor Management Relations Act of

1947 did not apply to the picketing of a foreign ship operated entirely by

foreign seamen under foreign arucles while the vessel was temporarily berthed

ina U.S. port, absent a clear expression of legislative intent.)

12

employ U.S. citizens abroad). Although the potential conflict

between the concurrent application of both U.S. and Saudi

employment law was not specifically addressed, the Court did

recognize that the purpose of the “clear expression” rule was “to

protect against unintended clashes between our laws and those

ot other nations. . . .” Jd. at 1230.

"Title VII defined “commerce” as including commerce “be-

tween a State and any place outside thereof.” Id. at 1232

(emphasis supplied). Although Title VII's definition of “com-

merce” was different from but no less broad than the Sherman

Act's reference to “foreign commerce,” the Court held that it

was insufficient to prove that Congress intended the statute to

apply to employers outside the United States. The Court further

noted that it had “repeatedly” held that even statutes that

expressly refer to foreign commerce do not necessarily apply

abroad.!”

10. /d. at 1232, citing New York Central R.R. Co., v. Chisholm, 268 U.S.

29 (1925) (refusing to construe the words “foreign commerce” to permit the

estate of a U.S. employee to recover under the Federal Employers Liability

Act trom a U.S. railroad company for damages resulting from a railroad

accident which occurred 30 miles north of the Canada-United States border).

Accord Lujan v. Defenders of Wildlife, —— U.S. ——, 112 S.Ct. 2130, 2147

(1992) (Stevens, J., concurring in judgment, concluded that Section 7(a)(2) of

the Endangered Species Act did not apply extraterritorially, because there was

no clear indication that the provision was intended to apply in foreign

jursidictions. )

The Aramco Court-reconciledits holdings in Chisholm and McCulloch with

Steele v. Bulova Watch Co. , 344 U.S. 280, 286 — 87 (1952). In Steele, the Court

found that tar broader language—“all commerce which may iawfully be

regulated by Congress — justified the application of the Lanham Act to foreign

conduct. The Court in Steele also specifically noted that, given the fact that

Mexican courts had nullified defendant's Mexican Bulova trademark registra-

tion, application of the Lanham Act would not “impugn foreign law” or cause

an “interference with the sovercignty of another nation.” Steele, 344 U.S. at

289.

13

Il. NEITHER THE PLAIN LANGUAGE NOR THE LEG-

ISLATIVE HISTORY OF THE SHERMAN ACT DEM-

ONSTRATES A CONGRESSIONAL INTENT TO AP-

PLY IT EXTRATERRITORIALLY SO AS TO

CONFLICT WITH AND UNDERMINE ANOTHER

SOVEREIGN’S TERRITORIAL LAWS.

Like the NLRA and Title VII, the plain language and the

legislative history of the Sherman Act manifest no Congressional

intent to apply it to conduct regulated by a foreign sovereign

within its territory, where to do so would undermine the foreign

sovereign’s laws.

Section | of the Sherman Act declares illegal contracts,

combinations or conspiracies, “in restraint of trade or commerce

among the several States, or with foreign nations.” 15 U.S.C. §

1 (emphasis supplied). This language is no broader than that

read with restraint in Aramco, Chisholm, and McCulloch. This,

to many, should be sufficient to put an end to the issue of

possible contrary legislative construction.

If one needs to look further, to the legislative history of the

Sherman Act, one can question whether the Sherman Act was in

fact intended to be applied extraterritorially at all. Congress

cannot, however, be saté to have shown any indication of an

intent to override The Territorial Preference.'!

11. None of the drafters of the Sherman Act suggested that it applied to

conduct outside the territory of the United States regulated by the conflicting

law or policy of another sovereign state. Senator George of Mississippi, one of

the principals in the debate. was concerned that the Sherman Bill could permit

wholesale evasion if it did not apply to agreements made outside the territory

of the United States: “If the [anticompetitive] agreement be not made within

the jurisdiction of the United States, as if it be made in Canada, it is not within

the terms of the bill.” Senator Sherman agreed that cartels formed outside the

United States could not be reached but said the proceeds of those cartels

realized within the United States could be. 21 Cong. Rec. 2461 (1890). It thus

does not appear that overriding The Territorial Preference ever occurred to

either Senators George, Sherman, or indeed to any other legislator responsible

for the Act. Accord, American Banana Co. v. United Fruit Co. , 213 U.S. 347

(1909) (which went considerably further and refused to apply the Sherman Act

extraterritorially even absent foreign state regulation). American Banana, of

course, has been substantially overruled as discussed in W. S. Kirkpatrick v.

Environmental Tectonics Corp., 493 U.S. 400, 407 (1990) (appiying Foreign

14

Notwithstanding the legislative history, Canada under-

stands that it is almost universally accepted through eighty years

of Supreme Court jurisprudence that the plain meaning of

foreign gommerce in the Sherman Act provides for jurisdiction

over foreign persons and some foreign conduct under the effects

doctrine. Canada does not object to the assertion of U.S.

antitrust jurisdiction to reach foreign conduct under the effects

doctrine —so long as there is no conflict between U.S. and

foreign local law.

Ill. NOR DOES THE FOREIGN TRADE ANTITRUST

IMPROVEMENTS ACT OF 1982, AMENDING THE

SHERMAN ACT, EXPRESS AN INTENT TO OVER-

RIDE THE TERRITORIAL PREFERENCE IN SITU-

ATIONS OF LEGAL CONFLICT UNDER U.S. AND

INTERNATIONAL LAW.

In 1982, Congress amended the jurisdictional provisions of

the Sherman Act to promote U.S. exports. The Foreign Trade

Antitrust Improvements Act (“FTAIA”)!? exempts from Sher-

man Act jurisdiction conduct involving trade or commerce with

foreign states where there is no direct, substantial and reason-

ably toreseeable effect on domestic, import or export commerce.

15 U.S.C. § 6a. The FTAIA does not say when U.S. courts do

have antitrust jurisdiction, except by negative implication. The

FTAIA is therefore similar to the alien exemption provision of

Title VII discussed in Aramco: it eliminates a portion of the U.S.

courts’ jurisdiction, but does not increase or clarify the proper

scope of the remaining jurisdiction.'* In fact, the legislative

Corrupt Practices Act extraterritorially).

12. The FTAIA specifically excludes from its scope conduct involving

unport trade or commerce. Import trade or commerce remains covered by the

Act of 1890. The London reinsurance Petitioners were selling reinsurance and

retrocessional reinsurance risk protection to U.S. insurance companies located

in the United States. This probably constitutes the importation of reinsurance

services into the United States.

13. Title VII's alien exemption provision clarified that the statute “shall

not apply to an employer with respect to the employment of aliens outside any

State.” 111 S. Ct. at 1233-34 (emphasis supplied). The Aramco Court rejected

Petitioners contention that this provision should be construed by negative

inference to mean that Congress intended to cover U.S. citizens working

15

history of the FTAIA establishes that Congress did not intend to

modify the clear expression or any other applicable rule of

jurisdictional limitation in determining the scope of Sherman

Act jurisdiction in a case of proposed extraterritorial application:

[T]he bill is intended neither to prevent nor to encour-

age additional judicial recognition of the special inter-

national characteristics of transactions. If a court deter-

mines that the requirements for subject matter

jurisdiction are met, bill would have no effect on the

courts ability to employ notions of comity, see, e.g.,

Timberlane Lumber Co. v. Bank of America, 549 F.2d

1287 (3rd [sic] Cir. 1979), or otherwise to take account

of the international character of the transaction.

H.R. Comm. on the Judiciary, H.R. Rep. No. 97-686, 97th

Cong., 2d Sess. 13 (1982) (emphasis supplied).

IV. IN THE HUNDRED YEARS OF JURISPRUDENCE

FOLLOWING PASSAGE OF THE SHERMAN ACT,

THIS COURT HAS NEVER UPHELD SHERMAN ACT

JURISDICTION OVER FOREIGN PERSONS EN-

GAGED IN PREDOMINANTLY FOREIGN CON-

DUCT WHERE THE EXERCISE OF SUCH JURIS-

DICTION WOULD DIRECTLY CONFLICT WITH

THE LOCAL LAWS AND POLICIES OF THE FOR-

EIGN JURISDICTION.

This Court has not until now been presented with the

assertion that the Sherman Act can override contrary foreign

local law. To date, in the antitrust cases which this Court has

considered, either the actors were located or a significant

proportion of the conduct at issue occurred in the United

States.'* In those cases in which predominantly foreign actors

abroad. /d.

14. For example, in United States v. Sisal Sales Corp., 274 U.S. 268

(1927), the agreement and significant overt acts occurred in the United States.

Id. at 276. Moreover, the defendants did not claim that the imposition of U.S.

antitrust law directly conflicted with Mexican law. See Brief of Petitioners,

United States v. Sisal Sales Corp., No. 200. Therefore, the Court had no

occasion to address the issue of a possible override of The Territorial

16

and conduct were involved, a possible conflict of the two

sovereign states’ laws was not addressed.

The leading modern authority, United States v. Aluminum

Co. of America (“Alcoa”), 148 F.2d 416 (2d Cir. 1945), pre-

sented no conflict. In Alcoa, Judge Hand, writing for a three

judge panel hearing the case on certification from the Supreme

Court, concluded that alleged combinations between Alumi-

nium Limited, a Canadian company, and European aluminum

producers would be unlawful under U.S. antitrust law, even if

made abroad, “if they were intended to affect imports and did

affect them.” /d. at 444. If there had been a clear conflict of

jurisdiction, however, it is unlikely that Judge Hand would have

applied the Sherman Act under his “effects” test. He recognized

that Sherman Act jurisdiction should be limited by conflict of

laws considerations:

[I]t is quite true that we are not to read general words,

such as those in this Act, without regard to the limita-

tions customarily observed by nations upon the exercise

of their powers; limitations which generally correspond

to those fixed by the “Conflict of Laws.”

148 F.2d at 443.

Likewise, in Continental Ore Co. v. Union Carbide &

Carbon Corp. , 370 U.S. 690 (1962), this Court found no conflict.

In that case, a Canadian Government agency enlisted the

Canadian subsidiary of the U.S. firm, Union Carbide, to help

the Canadian agency purchase and allocate wartime supplies of

a rare metal. The U.S. plaintiff, a competitor of Union Carbide,

claimed antitrust injury because Carbide’s subsidiary bought

none of its metal. As the Court indicated, there was no question

of the propriety of exercising U.S. jurisdiction over the Cana-

dian subsidiary because it was not a party to the suit, having

never been served. /d. at 706. The Court found no jurisdictional

limitation; there was no evidence that the Canadian Govern-

ment had directed or approved of the discriminatory buying

practices. There was no communication to the U.S. courts

NOTES (Continued)

Preterence. See Brief of the United States, United States v. Sisal Sales Corp.,

Ni . 200 ut a/.

——

17

declaring a Canadian interest in conflict with U.S. enforcement

(in contrast to the British Government's brief here). By impli-

cation, it a clear sovereign policy interest were manifested, The

Territorial Preference would apply.'*

VV. REPUDIATING THE TERRITORIAL PREFERENCE

ABSENT CLEAR LEGISLATIVE DIRECTION TO DO

SO COULD INVITE FOREIGN EXTRATERRITORIAL

COUNTERMEASURES AGAINST U.S. TERRITORIAL

SOVEREIGNTY UNDERMINING IMPORTANT U.S.

INTERESTS.

The United States has a vital interest in applying its laws to

conduct by persons within its borders. The United States has

responded to certain foreign political boycotts by prohibiting

United States persons from furnishing boycotting countries with

information concerning the race, religion, sex, or national origin

of any other United States person. Export Administration Act,

50 U.S.C. App. § 2407 et seq. (1988). Would the United States

not consider it a serious infringement of law if a boycotting

country attempted to seize and prosecute a resident in the

1S. Nor can it have mattered if the Canadian Government had instructed

an official of the Canadian subsidiary to buy only from Union Carbide and had

communicated this instruction while the subsidiary’s official was on a buying

trip in Colorado, Limited ministerial acts in the United States would not, in

this circumstance, confer U.S. jurisdiction.

Canada agrees with the United States Solicitor General that a statement to

the Court by a friendly foreign sovercign should be given dispositive weight in

determining whether conduct was mandated by the sovereign in accordance

with its laws. Briet for the United States as Amicus Curiae in Support of

Petition for Certiorari in Matsushita Electric Industrial Co., Ltd. v. Zenith

Radio Corp. , No. 83-2004 at 17. It should be equally dispositive if the foreign

sovereign asserts that there is a jurisdictional conflict, short of mutually

incompatible complusion. For example, where there is a governmental

request, or the establishement of a scheme of regulation requiring primacy of

territorial jurisdiction, the statement by the foreign sovercign should suffice.

See J.S. Stanford, (then Director General, Bureau of Commercial and Com-

modity Relations, External Affairs of the Government of Canada, now Cana-

dian Deputy Solicitory General, speaking in his private capacity), “The

Application of the Sherman Act to Conduct Outside the United States: A View

From Abroad,” 11 Cornell Int'l L.J. 195, 203 (1978) (a limited interpretation of

the defense of foreign compulsion “seems to place the government of free

enterprise economics at a disadvantage in relation to governments that

practice a more interventionist policy’).

IS

United States complying with this U.S. law? Repudiation of The

lerritorial Preterence, it would appear, threatens U.S. interests

in effectively governing sovereign U.S. territory no less than the

interests of other states in maintaining sovereignty within their

own territories.

VI. EVEN IF THE DISTRICT COURT HAD JURISDIC-

TION UNDER THE SHERMAN ACT TO HEAR

THESE CLAIMS, INTERNATIONAL LAW AS EM-

BODIED IN U.S. LAW REQUIRES THAT IT RE-

FRAIN FROM DOING SO.

A. A Direct Conflict of Law Poses a Fundamental Juris-

dictional Issue and Cannot be “Balanced.”

Where two sovereign states assert concurrent conflicting

jurisdiction over the same conduct, it is not a question of mere

politeness between two states. As a jurisdictional issue, conflicts

of law should not be “weighed” or “balanced” against other

national or international! interests. Too often, as in the decision

below, the result is virtually predetermined.'® As this Court

recognized in McCulloch v. Sociedad Nacional, 372 U.S. 10, 19

1963), adopting a “balancing” test under such circumstances

“would project the courts into application of the sanctions of the

Act to toreign-tlag ships on a purely ad hoc weighing of contacts

basis” and “would inevitably lead to embarrassment in foreign

attairs and be entirely infeasible in actual practice.”'’ This Court

l6. See James R. Atwood & Kingman Brewster, Antitrust and American

Business Abroad 166 (2d ed. 1981). Conflicts between the laws of nations

should be “an integral part of the jurisdictional issue.” The “bulk of interna-

tional scholarship historically treated comity as a qualification on the scope of

state s legislative pursidiction.” /d. National courts should not undermine the

regulatory tramework of policies of foreign sovercigns within their territory.

See &. g. Address by the then Australian Attorney-General Senator Peter

Durack, O.C. to the American Bar Association, 12 August 1981, “Australia:

Extraterritortal Application of United States Law,” reprinted in, Lowe,

Latratermrorial Jurwdu tion, 9, 94 (1983) (But it is not merely that the court

lacks the expertise, it is rather that it ts not part of the judicial function to

decide whether « law or policy 1s justified by what a court conceives to be in

the national interest.

17 tudicia! baluncing of interest and contacts is a time tested method for

resolving conflicts of Laws where jurisdiction is concurrent but not conflicting,

19

should reject the Ninth Circuit's balancing test as applied here,

as it reyected the balancing test of the National Labor Relations

Board in McCulloch. Id.

B. At A Minimum, Sovereign Regulatory Conflicts Must

be Accorded Substantially Greater Weight Than

Other Factors in a Conflict of Laws Balancing.

Even if The Territorial Preference in a sovereign jurisdic-

tional conflict were to be balanced against other factors, how-

ever, it should be accorded substantially greater weight than it

was accorded by the Ninth Circuit. The one case in which the

Supreme Court has balanced conflicting sovereign interests was

Societe Internationale Pour Participations Industrielles et Com-

merciales v. Rogers, 357 U.S. 197, 212 (1958). There, in contrast

to this case, the Court unquestionably had jurisdiction; indeed,

the foreign party was the plaintiff. The issue was whether the

district court could dismiss the plaintiff's claim based on a failure

to produce documents whose production was prohibited by the

law of Switzerland, the foreign state in which the documents

were located. The Court applied The Territorial Preference and

retrained from coercing foreign discovery as the price of main-

taming the U.S. suit. If The Territorial Preference is theoreti-

cally open to balancing, the rationale of Rogers should restrict

the exercise of extraterritorial jurisdiction in this case.

CONCLUSION

This Court has consistently applied principles of United

States and international law to limit claims by private parties and

executive officials that they are free to apply U.S. law abroad, in

spite of the consequences to other sovereign states within their

or where one forum is less convenient than the other. It has not succeeded

where it has been used to override The Territorial) Preference. Because

sovereign conflict balancing is inappropriate where basic subject matter

jurisdiction is at issue does not mean that U.S. courts should be free, absent

clear legislative expression, to ignore The Territorial Preference and simply

assert jurisdiction. Canada notes that, in Laker Airways v. Sabena, Belgium

World Airlines, 731 F.2d 909, 948-950 (D.C. Cir. 1984), the court failed to

consider the precedents cited herein; in Canada’s view, the result in that case

was not in accordance with U.S. and customary international law.

20

territories. This Court has, until now, required a clear expres-

sion of Congressional authorization for such enforcement before

approving it. Nothing in the Sherman Act, as amended, autho-

rizes a departure from this tradition. This case provides a rare

and important opportunity to reaffirm, in this modern day of

unprecedented and increasing global interdependence, the

strong and continuing connection between United States and

international law in addressing international jurisdictional con-

flicts.

Accordingly, the judgement of the Court of Appeals for the

Ninth Circuit should be reversed.

Respectfully submitted,

Of Counsel: DOUGLAS E. ROSENTHAL

GILLES H. LAUZON, O.C. Counsel of Record

Department of Justice KAY C. GEORGI

of Canada DOUGLAS B. RUTZEN

COUDERT BROTHERS

1627 I Street, N.W.

Suite 1200

Washington, D.C. 20006

(202) 775-5100

Counsel for the Government

of Canada Amicus Curiae

November 19, 1992