# Petition for Writ of Certiorari — Grupo Protexa, S. A. v. All American Marine Slip > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0190%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1994 - **Citation:** 513 U.S. 986 ## Text r TLE a / 94 207 JUL 27 199 No. Supreme Court of the Anited States October Term, 1994 GRUPO PROTEXA, S.A. A COMPANY ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF MEXICO, AND CONDUX S.A. DE C.V., A COMPANY ORGANIZED UNDER THE LAWS OF THE REPUBLIC OF MEXICO, Petitioners, vs. ALL AMERICAN MARINE SLIP, A DIVISION OF MARINE OFFICE OF AMERICAN CORPORATION, A NEW YORK CORPORATION, AFIA, A DELAWARE CORPORATION, AND CIGNA, A DELAWARE CORPORATION, Respondents. Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit PETITION FOR A WRIT OF CERTIORARI KENNETH M. VAN DEVENTER Of Counsel SIDNEY M. SCHREIBER NICHOLAS deB. KATZENBACH RIKER, DANZIG, SCHERER, HYLAND & PERRETTI Attorneys for Petitioners Headquarters Plaza One Speedwell Avenue Morristown, New Jersey 07962-1981 (201) 538-0800 5433 Vv bz (800) 3 APPEAL + (800) 5 APPEAL + (800) BRIEF 21 4 WZ orice, irc QUESTIONS PRESENTED Petitioners, Mexican corporate citizens, were ordered by the Mexican government to raise and remove their wrecked vessel which sunk in Mexican offshore oil fields. The government acted: (i) to remove an environmental and commercial threat to the oil fields and surrounding waters and shores; (ii) to conduct a criminal investigation into the cause of the loss; and (iii) to effect the removal of the bodies of 27 Mexican citizens trapped in the hull. Petitioners had insurance policies with the Respondents for expenses incurred in removing wrecks, “when such removal is compulsory by law.” After notifying the insurance carriers of the loss and the removal order, Petitioners complied with the removal order. After the removal was completed, Petitioners presented a claim for the monies due from the underwriters. Petitioners sued when, several months after the removal operation was completed, Respondents for the first time claimed that the removal order was invalid and therefore the removal was not “compulsory by law.” The courts below refused to adhere to traditional principles of comity, or to apply the act of state doctrine and concluded, despite conflicting expert opinions, that the removal order was not valid under domestic Mexican law. The questions presented are: 1. Is it error for a U.S. district court to review de novo a determination by a foreign government of its authority under its law to issue a coercive removal order with respect to a shipwreck in waters subject to its jurisdiction? 2. Is the official act of a foreign government within its own jurisdiction which is consistent with international law and United States policy entitled to binding effect in United States courts as to all persons who were in a position to cause its validity to be litigated at the time of its occurrence? ii 3. Is the Third Circuit Court of Appeals correct in holding that both comity and the act of state doctrine apply only to the official acts of foreign governments within their own jurisdiction where there is also proof of a threat to the conduct of foreign relations by the United States executive and legislative branches of government? 4. Did the Third Circuit’s refusal to apply the act of state doctrine abrogate Petitioners’ vested contractual rights in violation of the Fifth Amendment to the Constitution? 5. Does a facially valid governmental order create legal compulsion so as to satisfy the requirements of the insurance contract here in question, notwithstanding an American court’s determination eight years later that it was technically invalid under Mexican law? tea tah ioe edibmiiag + eM ee eee LIST OF PARTIES All of the parties in the United States Court of Appeals for the Third Circuit are listed in the caption. CORPORATE PARTY’S AFFILIATION Petitioner Grupo Protexa, S.A. is the parent company of Petitioner Condux S.A. de C.V. Petitioners have no other parent companies, subsidiaries (other than wholly-owned subsidiaries) or affiliates. iv TABLE OF CONTENTS Page CPUC TUNOUNIOE oo ain c's hiwavsska diesen basis i SEIN SON AN ois gv uaaeh Kecbudeeeskeneaanes iii eg PP rere er eee ili CO I Ae ee erry Sy Peet Serer iv PE 66003 866 Neate arise vi CINE. winds % bv es baue ec cbccbunesscedusets i PE IID ig once davissnsewddcienscse 1 Constitutional, Provisions, Treaties, Statutes, Ordinances and Regulations Involved ..................0008: 1 I og has dndnwsscudessciudwiees 2 Pic SEE kc chon eeapunreeaeebeudese oa nus 2 i: MEE: whe nk kc deeb eae 6464 es5 anv cubes 2 C. Removal Ordered by Mexican Government ..... 3 D. Underwriters’ Notice andAgreement .......... a E. Final Adjustment—“Invalidity” Claim ......... 5 F. Summary Judgment Motion ................. 8 I. J. Vv Contents es I 66.5 6 ok kn Gd av cdndeuwanes Reasons for Granting the Writ ...................... I. a eo we eka eek bea eS Si A. A United States Court May Not Judge the Validity of the Act of a Foreign Government Within Its Jurisdiction Under Its Local Law. eeseee@ Ceeseeeueeceesecesceaeeececeooaoeeoeneqee se eoeeoe ee 6 6 6 Where the Act of State in Question Is Not Offensive to United States or International Law, Constitutional Separation of Powers Considerations Are Irrelevant. ........... The Third Circuit’s Failure to Recognize the Mexican Act of State as Valid Abrogated Petitioners’ Vested Contractual Rights and Conferred a Windfall on Respondents. ..... es CI WS 6 hii oa chen cent a decce cas 14 16 20 21 vi Contents Page A. AFacially Valid Governmental Order, Even If Technicaily Invalid, Satisfies the Criteria of the insurance Contract. ................. 21 B. No Validity Requirement in Circuit Court PUT ERG cv anencseeeddedeekende ves 22 SD in av-0s cecwneesdeebecsseeneseebesteress 24 TABLE OF CITATIONS Cases Cited: Banco De Espana v. Federal Reserve Bank, 114 F.2d 438 Cn ED is Wi kn-e vita ded dvcdwanes ¢medeksee 15 Bernstein v. Van Heygen Feres Societe Anonyme, 163 F.2d 246 (2d Cir.), cert. denied, 332 U.S.772 (1947) ...... 15 Blad v. Bonefield, 36 Eng. Rep. 992 (1674) ............ 14 Continental Oil Co. v. Bonanza Corp.,706 F.2d 1365 (Sth ee er re ee ee eee 22, 23 Earn Line S.S. Co. v. Sutherland §.S. Co., 254 F. 126 (S.D.N.Y. 1918), aff'd, 264 F. 276 (2d Cir. 1920) ..... 15 East Coast Tender Service v. Robert T. Winzinger, Inc., 759 Fa GS HUPEEED oo Son ccdccccececesecsees 12,21,22 Employees Ins. of Wassau v. Trotter Towing Corp.,834 ee SEN BEND cn ccvcccccovedsnecceeces 21 vii Contents Page Grupo Protexa S.A. v. All American Marine Slip, » 04 F.2d SE SE a taka kw tees eeaehatindess eine 22 Ingersoll Mill Mach. Co. v. M/V Bodena, 619 F. Supp. 493 GE Go's a0 We coe bere cates veccen' sees 21,22 Lake Charles Harbor & Terminal Dist. v. Imperial Casualty & Indem. Co., 857 F.2d 286 (Sth Cir. 1988) .. 21,22 Northbrook Excess & Surplus v. Proctor & Gamble, 324 FL ROE so eGeas une did edandiwccece 21,22 Oetjen v. Central Leather Co., 246 U.S.297(1918) ..... 14 Oritani Savings & Loan v. Fidelity & Deposit Co., 989 F.2d SPP SUE Sa Vewhecdecvetcvesviveunceeee 21 Progress Marine, Inc. v. Foremost Ins. Co., 642 F.2d 816 (Sth Cir.), cert. denied, 454 U.S. 860(1981) ......... 21,22 Ricaud v. American Metal Co., 246 U.S. 304(1918) ..... 14 Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., ee 22 Underhill v. Hernandez, 168 U.S. 250 (1897) ......... 12, 14,19 Union Shipping & Trading Co. v. United States, 127 F.2d PR IPEEE . i's naivd 0604 ddcen ee peseeuceens 15 W.S. Kirkpatrick v. Environmental Tectronics, 493 U.S. PEED hhc aee cs edscaeccucceveen ens 12, 16, 17, 18, 19 viii Contents Page Statutes Cited: DEED nds 045 08 8400 cenwaede Cueaeers l PE cack nuastdccwelysvnessadwecscenvs 8 United States Constitution Cited: Pe es i nsenaaves Cabgeenns sees 2, 13,20 Other Authorities Cited: Fox, Gregory H., Reexamining the Act of State Doctrine: An Integr-*ed Conflicts Analysis, 33 Harv. Int’1 L.J. 521 COPE kaknehiae ance 0e6s40isudsneeneee ent 12, 13,14 Katzenbach, Nicholas deB., Conflicts On An Unruly Horse: Reciprocal Claims and Tolerances in Interstate and International Law, 65 Yale L.J.1087 (1956) ...... 13,14 Parks, Alex L., The Law and Practic ° of Marine Insurance srr re 20 Swanson, Steven R., A Threshold Test for Validity: The Supreme Court Narrows the Act of State Doctrine, 23 Wel 2. SET SLA UPEROPED ccccrccvccassccacs 13,14 ~~ ere ee ix Contents APPENDIX Appendix A — Order Denying Petition for Rehearing of the United States Court of Appeals for the Third Circuit or ee er ere Appendix B — Opinion of the United States Court of Appecls, Third Circuit Dated March 29, 1994 ....... Appendix C — Opinion of the United States District Court for the District of New Jersey Filed May 12,1993 .... Appendix D -—— Opinicn of the United States Court of Appeals, Third Circuit Dated January 8,1992 ....... Appendix E — Opinion of the United States District Court for the District of New Jersey Dated November 16, 1990 Appendix F — Opinion and Order of the United States District Court for the District of New Jersey Filed PN NE ac kciwccbccaak cccvasctavscceess Page la 3a 66a 120a 143a ] OPINIONS BELOW The opinion of the District Court denying Petitioners’ and Respondents’ cross-motions for summary judgment is unreported. (Appendix F, infra, pp. 198a-216a.) The first trial opinion of the District Court is réported at 753 F. Supp. 1217. (Appendix E, infra, pp. 143a-197a.) The first opinion of the Court of Appeals is reported at 954 F.2d 130. (Appendix D, infra, pp. 120a-142a.) The second opinion of the District Court, after remand from the Court of Appeals, is not reported. (Appendix C, infra, pp. 66a-119a.) The second opinion of the Court of Appeals is reported at 20 F.3d 1224. (Appendix B, infra, pp. 3a-65a.) The order of the Court of Appeals denying Petitioners’ request for a rehearing is unreported. (Appendix A, infra, pp. 1a-2a.) STATEMENT OF JURISDICTION The judgment of the Court of Appeals was entered on March 29, 1994. (Appendix B.) A timely suggestion for rehearing in banc and petition for rehearing was denied on April 28, 1994. (Appendix A.) This petition for certiorari is being filed within the prescribed period of ninety (90) days after April 28, 1994. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). CONSTITUTIONAL PROVISIONS, TREATIES, STATUTES, ORDINANCES AND REGULATIONS INVOLVED This case did not turn on any international or United States constitutional provisions, treaties, statutes, ordinances or regulations. It turned solely on the determination that under federal common law an act of the Mexican government was invalid under Mexican law. It is not necessary to cite the pertinent articles of Mexican law because Petitioners, though not agreeing, do not challenge the court’s analysis of Mexican law. Petitioners maintain that under traditional principles of comity and the act of state 2 doctrine which has constitutional underpinnings, and the Due Process Clause of the Fifth Amendment, the lower courts should have found the governmental act was valid under Mexican law. STATEMENT OF THE CASE A. The Policy. Respondents, two insurance companies, were among a group of seven underwriters that issued a Protection and Indemnity insurance policy to Petitioners covering a fleet of vessels. Under the Policy (SP-23), Respondents were obligated to indemnify Petitioners for all costs and expenses of, or incidental to, the removal of the wreck of any of the vessels when such removal was “compulsory by law.” B. The Wreck. On December 14, 1985, Petitioners’ vessel, the Huichol I, sank, during a storm, in one of the oil fields being developed by the Mexican national oil company (PEMEX) off the coast of Mexico in the Bay of Campeche adjacent to the Gulf of Mexico. At least 27 seamen — all Mexican citizens — died in the wreck. Their bodies were trapped in the Huichol when it sank. The Huichol sank approximately 50 miles off the Coast of Mexico, and therefore well within Mexico’s 200-mile Exclusive Economic Zone (“EEZ”). Under Article 56 of the United Nations Convention on the Law of the Sea, Mexico has exclusive jurisdiction in the EEZ for purposes of regulating all activities related to its sovereign rights to explore, exploit, conserve and manage the natural resources in the EEZ. In 1985, the Campeche oil fields where the Huichol sank contained more than 50 oil drilling platforms and were criss- 3 crossed with undersea high pressure gas and oil pipelines, many uncharted. The United States Defense Mapping Agency’s “Sailing Directions For the Caribbean Sea” described the area as follows: Offshore oil fields are being extensively developed in the Bay of Campeche. Multiple drilling rigs, platforms and associated structures, sometimes unlit, may be encountered anywhere in the area. Numerous pipelines, many uncharted, exist within the oil fields, and between them and the shore. Within the oil fields there is a zone containing a particularly dense concentration of pipelines, platforms and other structures related to the oil exploration activities. This zone is marked “ANCHORAGE PROHIBITED” on all recognized nautical charts. The “ANCHORAGE PROHIBITED” zone is treated by the Mexican government as an “area of extreme safety.” The Huichol sank not only 150 miles inside Mexico’s EEZ, and not simply in the middle of the Campeche oil fields, but 1.5 miles inside this particularly sensitive area. C. Removal Ordered By Mexican Government. On December 17, 1985, the General Director’s Office of the Mexican Merchant Marine (“Marine Mercante”), which is the functional equivalent of the United States Coast Guard, acting through the local Port Captain, Captain Rebolledo, issued a written order to Petitioners. The United States District Court for the District of New Jersey found that the order was an official act of the Mexican government directing Petitioners to immediately raise and remove the wreck. There has been no appeal from this finding. The removal order cited three articles of Mexican maritime statutes as the legal authority for its issuance. 4 Because the wreck was located in an “extreme safety” area, the Mexican government considered it to be an environmental and commercial threat to the oil fields, underwater pipelines, and surrounding waters and shores. This concern was heightened by the fact that the hurricane season was rapidly approaching. In addition, the Mexican “Procuraduria General De La Republica” (“PGR”), which is the functional equivalent of the United States Justice Department, ordered an investigation into the cause of the casualty. Under Mexican law, the Port Captain is required to cooperate and assist the PGR in such investigations. The PGR asked Captain Rebolledo to order that the Huichol be raised so that the investigation could be completed. There were intense social and political pressures for the removal to be completed without delay. The family members of the dead seamen were putting intense pressure on the government (including a visit by the President of the Republic himself) to effect the recovery of the bodies of their loved ones and to investigate the cause of the loss. The media was providing extensive coverage of the situation which was a national tragedy. Representatives of the Mexican Congress visited the Port Captain’s office to insure that the removal operation was being undertaken expeditiously. D. Underwriters’ Notice and Agreement. On the day after the sinking, all seven of the underwriters on the insurance policy were informed of the incident. They immediately dispatched a surveyor/adjuster to the site to represent their interest. The same day that the removal order was delivered to Petitioners, a copy was given to the surveyor/adjuster, the representative of the insurance carriers. He concluded that it needed to be complied with without delay and informed Petitioners to that effect. The surveyor/adjuster remained on site for the entire removal operation. He never once suggested to Petitioners that the 5 underwriters whom he represented had concerns regarding the validity of the removal order, or of the necessity to comply with it. Petitioners submitted a proposal to the underwriters for doing the removal operation themselves. Five of the seven underwriters on the Policy directed Petitioners to immediately begin the operation on the terms proposed in order to minimize any further liability. Respondents’ only response was to suggest that Petitioners get third party salvors involved as much as possible. If Respondents had concerns regarding the validity of the removal order, they had a contractual right under the terms of the Policy at that time to ask Petitioners to make further inquiry into its validity or to make a challenge to it in the Mexican courts. They never did. With full knowledge of all of the underwriters, including Respondents, Petitioners commenced compliance with the removal order. Respondents, apparently concerned over the efficiency of Petitioners’ removal operation, sent an additional surveyor to the site with instructions to assist Petitioners as needed and ensure Petitioners were aware of Respondents’ concerns, if any, about the removal operation. Respondents’ specially appointed surveyor arrived eleven days after the removal order was issued. During his entire time on the site, he, like the surveyor/ adjuster, never questioned the validity of the removal order, or the necessity of complying with it. In sum, despite complete knowledge of what was happening during the entire removal operation, neither Respondents’ on-site representatives nor the home-office representatives ever queried the validity of the removal order, or suggested that Petitioners should make further inquiry into its validity or challenge it. E. Final Adjustment — “Invalidity” Claim. Upon completion of the removal, Petitioners presented a 6 claim on the Policy to the underwriters’ adjuster. He adjusted the claim and approved it for payment. Five of the seven underwriters on the Policy paid their share. Respondents did not. They requested confirmation of the Port Captain’s authority to issue the order. Following established administrative procedures, Petitioners requested an opinion from the government on the issue of the Port Captain’s authority. In 1986 the following opinion was received from the office of the Marine Mercante, and forwarded to Respondents. It stated in pertinent part: According to the file, it is clear that the Port Captain of Cd. del Carmen, Campeche, had ground to intervene [citations omitted]. It is important to point out that article 86 of the Law of Navigation and Maritime Commerce in force, gives the Port Captain sufficient attribution to order removal of the wreck when at his judgment, it troubles the general waterways of communication. Concerning this matter the order from the Port Captain is completely justified by the following reasons among others: a) There is a great number of gas and oil pipelines, as well as drilling platforms and other oil installations in the areas in which the B/M “HUICHOL” sank. b) There is a significant traffic in said area, particularly of ships performing repair and maintenance works in the platforms, pipelines PT Been B: 5 ow 7 and other installations, so besides navigation, it performed diving operations, welding, removal of pieces etc.; these activities are been made in the surface as well as inside and in the bottom of the sea. Due to the foregoing this General Direction of Merchant Marine confirms the legal obligation of Condux, S.A. de C.V. to rescue and remove the ship B/M “HUICHOL” derived from the order No. CP-3312-23-3350 dated December 17, 1985, issued by the Port Captainships of Cd. del Carmen, Campeche. According to article 262 of the Law of General Ways of Communication, authorization is given to the Port Captain to intervene in the maritime accidents, as well as to perform assistance to the federal office of the government attorney, for which reasons he must integrate an investigation as wide as possible, in particular in this case in which several tens of lives were lost; thus, the removal in part was due because of the investigation of the accident itself, besides having been considered necessary for the reasons of heavy traffic and activities that are given in this area and the immediate danger that said wreck would bring for the navigation and the activities made in this area. Moreover, if the Port Captain’s order had not been followed, said authority would have proceeded to remove the ship under his own authority, requiring the owner of the ship the payment of the corresponding costs, if the owner refused to 8 make such payment ... this, independently from the penalties that may proceed for the noncompliance of the order. (Appendix F, infra, at pp. 203a-20S5a.) Despite this unequivocal affirmation of the Port Captain’s authority from the highest levels of the Mexican government, Respondents still refused to pay. Instead, for the first time since the removal order had been issued almost a year earlier, Respondents claimed that the order was “patently invalid” and that Petitioners should not have been complied with it. Petitioners brought this lawsuit in the United States District Court for the District of New Jersey. Jurisdiction was based on 28 U.S.C. § 1332. F. Summary Judgment Motion. After discovery, the parties cross-moved for summary judgment. Petitioners argued that under the act of state doctrine, the removal order, an act of the Mexican government, had to be treated by the American courts as a valid act. Petitioners also argued that under well settled rules of insurance contract construction a facially valid governmental removal order, even if ultimately proven to have been technically invalid, satisfied the plain meaning of the Policy language. Respondents countered with, inter alia, the argument that because the removal order was “patently invalid” and not backed by meaningful sanctions, no reasonable person would feel compelled to obey it. The trial court flatly rejected Respondents’ “patent invalidity” and “no sanctions” arguments, stating: It should be noted at this point that this court finds that [Respondents’] argument that the Order in the current action was so patently ee 9 invalid on its face that no reasonable owner could believe that failure to comply with such would possibly expose him to any liability belied by the fact that [Respondents] themselves took several months to review the order trying to determine its validity... .' Here, [Petitioners] were presented with a formally drawn Order which had the official seal of the Port Captain attached. * * ™ In this action, the presence of a removal order from the Port Captain could certainly have created a situation in which a reasonable owner of a wreck felt that a present and unconditional duty existed. In general, failure to comply with a government order exposes one to sanctions for disobedience, i.e., fines, penalties, etc. Moreover, due to the “presumption of validity” which attaches to official acts, a party under a governmental or judicial order is not generally allowed to disobey such while questioning it. [Citations omitted]. This Court, therefore, agrees with the [Petitioners’] contention that it is legally meaningless for [Respondents] to claim, in hindsight, that the order or the sanctions which it threatened may not have been enforceable. The [Petitioners’] potential for exposure to liability must be viewed in light 1. It was not until several months after the operation was completed that Respondents claimed to have obtained legal advice questioning the validity of the removal order. They refused, however, to produce the alleged legal opinion and still have not done so to this date. 10 of the Port Captain’s Order which certainly could be viewed as imposing a present and unconditional duty upon [Petitioners]. (Appendix F, infra, at pp. 214a-215a.) Notwithstanding the court’s acceptance of that rationale, which was then and remains to this day the essence of Petitioners’ position, the trial court also denied Petitioners’ motion on the basis that even if the order were valid, an insured would still have to demonstrate that it reacted reasonably to the Order in order to meet the “compulsion by law” threshold. G. Trial I. After a trial (“Trial F’’), the court held that Petitioners were not entitled to coverage because: (i) the removal of the wreck was not “compulsory by law” because the costs of compliance outweighed the sanctions for disobedience, so Petitioners should have ignored the order, or challenged it if pressed; and (ii) Petitioners failed to act as a “prudent uninsured” in conducting the removal operation. (Appendix E.) H. Appeal I. The trial court’s decision was reversed by the United States Court of Appeals for the Third Circuit (“Appeal I’). The Third Circuit held that: (i) if, as the trial court had assumed on the record before it, the Mexican government had issued a valid removal order, that would per se constitute legal compulsion; and (ii) the Policy provision containing a “prudent uninsured” condition pertained only to settlement of claims rather than coverage. It remanded for a new trial on all issues with instructions to make threshold determinations as to: (i) whether the removal order directed removal, and, if so, (ii) was the removal order valid (or eam Ae a an. WS BORO lnahotntelne 11 does the act of state doctrine mandate a presumption of validity). (Appendix D.) I. Trial Il. The second trial (“Trial IT’) was essentially a battle of foreign law experts. The trial court determined that the Port Captain’s order was a governmental order directing Petitioners to remove the wreck.” Despite that finding, the trial court refused to apply the act of state doctrine because: (i) the issue was of no interest to the Mexican government; and (ii) it would be unfair to respondents to apply the act of state doctrine, and the removal order was invalid under Mexican law. (Appendix C.) J. Appeal I. The Third Circuit affirmed (“Appeal I?’). Ignoring the comity underpinnings of the act of state doctrine, it held that the doctrine did not apply because Petitioners had not submitted any proof that there was a threat to the conduct of foreign relations by the Executive and Legislative branches of the United States if the act of state principle were not applied. It also held that in order to meet the per se rule of coverage for removals undertaken pursuant to governmental order, the order had to be both facially and technically valid. (Appendix B.) 2. Respondents never suggested at either trial that the removal order was not an act of state. In any case, at Trial J and Trial II the trial court heard testimony establishing that Mexico’s jurisdiction over activities related to Mexico’s sovereign rights in its exclusive economic zone is exercised through the port captains. That testimony led the trial court to conclude that “the Port Captain occupies a position of importance in the maritime industry and speaks with the force of law.” (emphasis added). Furthermore, in Trial I], Respondents’ legal experts both admitted that an order issued by the Port Captain would be “an act with the authority of the Mexican government.” There is no reasonable doubt the order was an act of the Mexican state. 12 K. Rehearing Request. Protexa petitioned for rehearing and suggested rehearing in banc. It argued that the Third Circuit’s requirement that only valid governmental orders create legal compulsion was not only in conflict with decisions of other circuits, but was also inconsistent with the Third Circuit’s own “compulsory by law” precedent in Appeal I, and East Coast Tender Service v. Robert T. Winzinger, Inc., 759 F.2d 280, 286 (3d Cir. 1985). The request and suggestion was rejected by an eleven to two vote.’ (Appendix A.) REASONS FOR GRANTING THE WRIT The Third Circuit decision in Appeal I] turns on the premise that notions of international comity, full faith and credit, and respect for a foreign sovereign, have been completely usurped by constitutional separation of powers considerations when undertaking an act of state analysis in a situation not involving international law or public policy of the forum. The Third Circuit’s distortion of the act of state doctrine treats foreign coercive orders as subject to collateral attack where domestic orders would not be. The Third Circuit’s proposition conflicts with a long line of United States Supreme Court decisions from Underhill v. Hernandez, 168 U.S. 250 (1897), through W.S. Kirkpatrick v. Environmental Tectronics, 493 U.S. 400 (1990). There is also conflict and confusion among the circuits and among international law scholars on exactly this issue.‘ 3. One judge voting for rehearing was Judge Becker, the author of East Coast Tender and a member of the Protexa Appeal I panel. 4. For a discussion of the role of comity in act of state cases, including a review of the pertinent Circuit and Supreme Court precedent, see Gregory H. Fox, Reexamining the Act of State Doctrine: An Integrated Conflicts Anaiysis, (Cont'd) saver: 13 Nevertheless, when a case turns, as did this case, on the validity of a foreign sovereign’s act under the sovereign’s own law, as opposed io international law or public policy, there is almost a century of unwavering Supreme Court precedent that requires the Court to treat that act as lawful under the local law. If the Third Circuit’s decision in this case is allowed to stand, that precedent will be flouted, comity will be undermined if not eliminated altogether, and the American legal system will be viewed as becoming parochial and lacking legitimacy in the international legal system. Simply put, New Jersey district court judges should not be telling the Mexican government that its acts, directed towards protection of its citizens and natural resources under its jurisdiction, are illegal under Mexican law. The misunderstanding of the Third Circuit not only distorts the act of state doctrine and the whole of comity, but has a substantial imput on insurance contracts for maritime purposes and perhaps others. Indeed Petitioners have been deprived of their unambiguous rights under the insurance contract in violation of the Due Process Clause of the Fifth Amendment to the Constitution. Moreover, the Third Circuit’s ruling that only governmental orders determined by United States courts to be valid under a foreign government’s law create legal compulsion conflicts with precedents of this Court, and that of other circuits, is contrary to a (Cont'd) 33 Harv. Int’] L.J. 521, 527 (1992) (assumes Supreme Court has “replaced the comity rationale with separation of powers concerns”); Steven R. Swanson, A Threshold Test for Validity: The Supreme Court Narrows the Act of State Doctrine, 23 Vand. J. Transnat’! L. 889 (1991) (“Proper application of the doctrine requires more sensitivity to the concerns of comity”); see also Nicholas deB. Katzenbach, Conflicts On An Unruly Horse: Reciprocal Claims and Tolerances in Interstate and International Law, 65 Yale L.J. 1087 (1956) (examines, inter alia, development of comity and act of state doctrine, and predicts development of a “political aspect” to doctrine in addition to, not as replacement for, traditional comity principles). id public policy that encourages citizens to obey governmental orders, and dramatically alters in favor of marine insurors the legal rights, obligations and expectations of parties to marine insurance contracts. I. ACTOFSTATE A. A United States Court May Not Judge the Validity of the Act of a Foreign Government Within Its Jurisdiction Under Its Local Law. In the classic statement of the act of state doctrine, Chief Justice Fuller affirmed that traditional comity considerations require that [e]very sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of the other within its own territory. Underhill v. Hernandez, 168 U.S. 250, 252 (1897); see also Ricaud v. American Metal Co., 246 U.S. 304, 309 (1918) (“when it is made to appear that the foreign government has acted in a given way on the subject-matter of the litigation, the details of such action or the merit of the result cannot be questioned but must be accepted by our courts as a rule for their decision”); Oetjen v. Central Leather Co., 246 U.S. 297, 303-04 (1918) (act of state doctrine rests “at last 5. Comity, a doctrine with ancient roots, Blad v. Bonefield, 36 Eng. Rep. 992 (1674), springs from the notion that mutual respect between sovereigns for each other’s legal systems will foster the development of an international legal system. An understanding of the act of the state doctrine is impossible without an understanding of comity and its vital role in the development of international law. See generally Fox, supra note 4, Swanson, supra note 4, and Katzenbach, supra note 4. 15 upon the highest considerations of international comity and expediency”). A well-established corollary to that doctrine is that American courts will not entertain challenges to the validity of the official act of a foreign sovereign under the local law of that sovereign. Bernstein v. Van Heygen Feres Societe Anonyme, 163 F.2d 246, 249 (2d Cir.) (“We have repeatedly declared, for over a period of at least thirty years, that a court of the forum will not undertake to pass upon the validity under municipal law of another state of the acts of officials of that state, purporting to act as such.”), cert. denied, 332 U.S. 772 (1947). Judge Learned Hand expressed the rule as follows: When public officers of a foreign country perform official acts in avowed pursuance of their authority, the court of another power will accept these acts as lawful and will not undertake to examine their validity under the local law. Union Shipping & Trading Co. v. United States, 127 F.2d 771,774 (2d Cir. 1942); Earn Line S.S. Co. v. Sutherland S.S. Co., 254 F. 126, 129 (S.D.N.Y. 1918) (Hand, J.) (“The act of another sovereign within its own territory is of necessity legal.”), aff'd, 264 F. 276 (2d Cir. 1920); Banco De Espana v. Federal Reserve Bank, 114 F.2d 438, 443 (2d Cir. 1940) (“It has been squarely held that courts of this country will not examine the acts of a foreign sovereign within its own borders, in order to determine whether or not those acts were legal under the municipal law of the foreign state.”). The decision below turned solely on the determination that the act by the Mexican government was invalid under domestic Mexican law. There was no suggestion that the act was contrary to international law or the public policy of the United States or that it nn ae 16 deviated from widely held standards of morality.® To the contrary, both lower courts determined that the Mexican government was motivated by legitimate health, safety and policy concerns. It was clear error for the courts below to ignore comity, and decide a case based solely on the determination that the Mexican government did not know its own law when it issued the removal order. B. Where the Act of State in Question Is Not Offensive to United States or International Law, Constitutional Separation of Powers Considerations Are Irrelevant. The Third Circuit Court of Appeals seeks to avoid the act of state_doctrine by saying that the Port Captain’s order does not involve separation of powers and sensitive foreign policy considerations. But this point is irrelevant to the issue in this case, namely whether a United States Court can question the validity of the foreign act of state under that foreign sovereign’s control. Separation of powers concerns are only implicated when a challenge is made to the validity of a foreign act of state under international law, or on the basis the act is repugnant to the public policy of the United States. Under those circumstances, traditional comity principles may not preclude examination of the act, but because such inquiry may create political issues, separation of powers concerns might. But that is not the case here where the determination of the validity of the Mexican government removal order was solely under Mexican law. In fact, in cases like this one, where the foreign act in no way offends international law or United States public policy the case for adhering to comity is strongest. The Third Circuit misinterpreted W.S. Kirkpatrick v. Environmental Tectronics, 493 U.S. 400 (1990), as standing for the 6. In fact, there was compelling expert testimony that the order was valid under international law. 17 proposition that comity has no place in act of state methodology. Environmental Tectonics was the unsuccessful bidder for a Nigerian government contract and sued Kirkpatrick, the successful bidder, asserting, inter alia, that Kirkpatrick, bribed a Nigerian official to obtain the contract. Kirkpatrick raised the defense of act of state. The legal adviser to the State Department advised the Court that judicial intervention would not embarrass or interfere with the conduct of foreign affairs. Justice Scalia, writing for the Court, observed that in every act of state case the Court would have had to declare an official act invalid. Because there was no official act of a foreign sovereign, the Court held that an act of state was missing. Accordingly, the doctrine was inapplicable. Justice Scalia noted that while at one time the act of state doctrine rested only “on the highest considerations of international comity and expediency,” the doctrine has since evolved to include, as a consequence of the separation of powers, a sense that the Judicial branch shall not act when such action may hinder the conduct of foreign affairs. The separation of powers underpinnings of the act of state doctrine developed in the context of governmental actions allegedly in violation of international law, usually the seizure of property located in the foreign state and seized in circumstances which would violate the United States’ view of international law. When the foreign act was questioned in a United States court (usually because the property showed up in this country with a new owner), the courts have refrained from acting. This is not such a case, because no violation of international law is alleged and there is no potential dispute on that ground. There is absolutely nothing in Kirkpatrick which suggests that the principles of comity should not be applied when no violation of international law or public policy is alleged. Conspicuous by its absence in Kirkpatrick is any attempt to overrule the prior opinions 18 of the Court applying the act of state doctrine to those circumstances or to restrict its application so as to eliminate the typical comity situation. In fact, Kirkpatrick expressly affirmed that “the policies underlying our act of state cases” are “international comity, respect for the sovereignty of foreign nations on their own territory and the avoidance of embarrassment to the Executive Branch in its conduct of foreign relations.” 493 U.S. at 408. If anything, by refusing to expand the act of state doctrine, Kirkpatrick reconfirmed the international comity and respect for sovereignty roots of the doctrine, rather than eliminating those roots as suggested by the Third Circuit. It could scarcely have been the Third Circuit’s contention that Kirkpatrick did away with comity. Yet by insisting that act of state applies only to those official acts which violate international law or U.S. public policy and seemingly forgetting comity entirely, the Circuit appears to ignore the fundamental roots of the act of state doctrine. It is only when comity is challenged because of alleged violations of international law that the constitutional separation of powers analysis comes into play on the theory that courts should be cautious in giving offense to foreign sovereigns. Where the official act, as here, is inoffensive to either international law or United States public policy, it is entitled to respect in our courts. Under rules of comity it is no less an act of state and cannot be collaterally attacked; in essence, it is entitled to the same respect — the same faith and credit — as the act of a sister state. The validity of the coercive order obviously could have been challenged in the Mexican courts, but there is no doctrine of U.S. law which requires judicial affirmation before the order is entitled to respect in our courts. Respondents did not need to be parties to the order to be bound by it. They had the contractual power and opportunity to insist that Petitioners question the validity of the order in Mexican courts at the time. Under United States law that was the only time and the only place that the validity of the 19 concededly coercive removal order could be questioned.’ ' The applicability of the act of state doctrine to the facts of this case can be seen most clearly if we assume that the official act had been questioned at the time and found valid under Mexican law by the Mexican courts. Would such a finding be binding on the Respondents, or would they, not having been formally parties to the Mexican action, still be entitled to question its validity through expert opinion when Petitioners attempted to enforce their judgment in the United States? Surely in those circumstances it - would be improper to litigate a second time in a U.S. court depending on experts’ opinions the validity of the act under Mexican law. If that is the case, then the Court of Appeals is simply saying that the validity of a foreign act of state is dependent on its having the imprimatur of a court (the highest court?) of that country. But that simply is not the law; the act of state cases assume the validity of the act of a foreign sovereign (untested in courts) within its own jurisdiction. In sum, comity and respect for sovereignty required the courts below to treat the Mexican government’s removal order as a valid act of state. There was no need to engage in a constitutional separation of powers analysis. The court’s failure to recognize and apply the still viable doctrine of comity under the facts of this case, which turns solely on the validity of a foreign sovereign act under that sovereign’s local law of a matter subject to its jurisdiction, caused the Third Circuit’s decision to be in direct conflict with every single act of state doctrine case decided by the Supreme Court from Underhill through Kirkpatrick. 7. The Policy contained a “claims control” clause that gave Respondents the right and the responsibility to control the handling of the loss. Under this clause, Respondents had an absolute right, if they were concerned about the validity of the order, to require Petitioners to challenge the order in Mexican courts. 20 C. The Third Circuit’s Failure to Recognize the Mexican Act of State as Valid Abrogated Petitioners’ Vested Contractual Rights and Conferred a Windfall on Respondents. By writing out of United States law notions of comity and international full faith and credit, the Third Circuit provided an unexpected and unbargained for windfall to all marine underwriters, including Respondents.* That might have been appropriate if Respondents had bargained for the right to collaterally attack the validity of foreign governmental acts before providing coverage — but that is just not the case. When setting premium rates, Respondents took into consideration that SP-23 would provide coverage for wreck removals undertaken pursuant to an order of a foreign government every bit as much as it would provide coverage for removals undertaken pursuant to an order of the United States government or a United States court. The severe restriction in coverage under SP-23 signalled by the Third Circuit unjustly enriches the Respondents who collected those premiums and abrogated Petitioners’ vested contract rights in violation of the Due Process Clause of the Fifth Amendment. 8. There was also uncontradicted trial testimony from a marine insurance expert that the Third Circuit’s refusal to treat the removal order as illegally compulsive dramatically alters the expectations of parties to SP-23. In addition to SP-23, the other standard form of wreck removal coverage is what is referred to as “broad form” coverage which responds whenever an insured deems wreck removal necessary. Alex L. Parks, in comparing the various wreck removal coverages available in 1987 when he wrote his authoritative treatise on marine insurance commented that the difference between “broad form” and “compulsory by law” wreck removal coverage had become illusory because “the courts (particularly in the Fifth Circuit) had so liberally interpreted what is ‘compulsory by law’ that the question may almost be rhetorical.” Alex L. Parks, The Law and Practice of Marine Insurance and Average 1034 (1987). Phe BOLT ea? Sa Te ines CO 1 Ser A Baer see 21 II. COMPULSORY BY LAW A. AFacially Valid Governmental Order, Even If Technically Invalid, Satisfies the Criteria of the Insurance Contract. Petitioners submit that a facially valid governmental order, without more, satisfies the threshold for insurance coverage under the wreck removal provisions of SP-23. SP-23, a pre-printed form which was offered to Petitioners on a “take it or leave it” basis, should be liberally construed in favor of coverage. Ingersoll Mill Mach. Co. v. M/V Bodena, 619 F. Supp. 493, 505 (S.D.N.Y. 1985); Lake Charles Harbor & Terminal Dist. v. Imperial Casualty & Indem. Co., 857 F.2d 286, 288 (Sth Cir. 1988) (“Doubts are resolved in favor of coverage.”); Employees Ins. of Wassau v. Trotter Towing Corp., 834 F.2d 1206 (Sth Cir. 1988); Oritani Savings & Loan v. Fidelity & Deposit Co., 989 F.2d 635, 642 n.3 (3d Cir. 1993); sec also Northbrook Excess & Surplus v. Proctor & Gamble, 924 F.2d 633, 639 (7th Cir. 1991). The words of SP-23 should be construed in their “plain, ordinary and popular sense,” Progress Marine, Inc. v. Foremost Ins. Co., 642 F.2d 816 (Sth Cir.), cert. denied, 454 U.S. 860 (1981), and in such manner as will give meaning to the reasonable expectations of the parties. East Coast Tender Serv. v. Robert T. Winziger, 759 F.2d 280, 286 (3d Cir. 1985). It is well established that governmental orders, even invalid orders, constitute legal compulsion. This is not a case where the removal order was transparently invalid or had only a frivolous pretense to validity. Indeed, as discussed, supra, the trial court flatly rejected that precise argument. Furthermore, there was a sharp dispute between the experts whether the Port Captain had the authority to issue the order. It might be noted that the trial court could have reasonably believed the Petitioners’ expert. Therefore, the removal order, even if it had been technically invalid, was nevertheless legally compelling and therefore fit the “plain, ordinary and popular” meaning of SP-23. 22 B. No Validity Requirement in Circuit Court Precedent. The Third Circuit’s holding that governmental removal orders do not, ipso facto, meet the “compulsory by law” threshold in SP- 23 unless the order is judicially declared valid, is also contrary to all previous precedent on the issue, including Third Circuit precedent. Including Appeal II, there are six decisions from three different United States Circuit Courts of Appeals that have considered what constitutes “compulsory by law” as the term is used in SP-23. These cases are: Grupo Protexa, S.A. v. All American Marine Slip, 954 F.2d 130 (3d Cir. 1992); East Coast Tender Serv., Inc. v. Robert T. Winziger, Inc., 759 F.2d 280 (3d Cir. 1985); Continental Oil Co. v. Bonanza Corp., 706 F.2d 1365 (Sth Cir. 1983); Progress Marine, Inc. v. Foremost Ins. Co., 642 F.2d 816 (Sth Cir.), cert. denied, 454 U.S. 860 (1981); and Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500 (2d Cir. 1972). All three United States Courts of Appeals have said that the existence of a governmental order directing removal is per se “compulsory by law.” In addition to the per se rule; the Fifth and Third Circuits have adopted a “more expansive” interpretation, which employs a rule of reason whereby the term can encompass “additional cases” beyond the per se rule of a governmental order. (Appendix D, infra, at pp. 130a-136a.) According to these cases, it would be unfair and impractical to require shipowners to wait for the government to take action in order to obtain coverage, when failure to remove the wreck could expose the shipowner to 9. The first court to speak of valid governmental orders was the Third Circuit in Appeal I — and that was only because on the record before it the trial had assumed a valid governmental removal order. Considering the expansive treatment of “compulsory by law” in East Coast Tender, the Third Circuit could not have intended to severely restrict coverage in Appeal II by creating a validity requirement — at least not without some stated rationale for doing so. SEES PS eee eS MBLC PL ho CIN AC AINE AED ABEL Ice AT BES een 23 statutory, criminal, or third-party liability. Bonanza, 706 F.2d at 1369-70 (“The owner, and consequently its insurer, would be exposed to repeated damage claims without being able to rely on policy coverage to eliminate the hazard unless a governmental agency ordered removal.”). Under Appeal II, however, the insured will not be able to rely on policy coverage even after the government directs the removal of the wreck. To obey the order, without first obtaining judicial approval of it, is to risk the possibility that years later (in this case eight years later in a courtroom in New Jersey), a judge may declare the order invalid. This is the only compulsory by law case where the government actually took direct action to force the owner to remove the wreck. To hold that even when faced with such a command the insured cannot be confident of coverage unless it can subsequently demonstrate that the order is valid, under local law, or that it took steps to challenge the validity of the order before complying, is contrary to the plain meaning of the policy language and serves no public purpose. 24 CONCLUSION For the foregoing reasons, Petitioners respectfully request that this Court grant its Petition for a Writ of Certiorari to the United States Court of Appeals for the Third Circuit. Respectfully submitted, KENNETH M. VAN DEVENTER Counsel of Record SIDNEY M. SCHREIBER NICHOLAS deB. KATZENBACH RIKER, DANZIG, SCHERER, HYLAND & PERRETTI Attorneys for Petitioners Grupo Protexa, S.A. and Condux S.A. de C.V. Dated: July 27, 1994 la APPENDIX A — ORDER DENYING PETITION FOR REHEARING OF THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT DATED APRIL 28, 1994 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT No. 93-5332 GRUPO PROTEXA, S.A., acompany organized under the laws of the Republic of Mexico; and CONDUX S.A. de C.V., a company organized under the laws of the Republic of Mexico Vv. THE ALL AMERICAN MARINE SLIP, a Division of MARINE OFFICE OF AMERICAN CORPORATION, a New York Corporation; AFIA, a Delaware Corporation; CIGNA, a Delaware Corporation 3 Grupo Protexa, S.A., and Condux, S.A. deC.V., Appellants On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 86-04212) SUR PETITION FOR REHEARING BEFORE: SLOVITER, Chief Judge, and BECKER, STAPLETON, MANSMANN, GREENBERG, HUTCHINSON, SCIRICA, COWEN, NYGAARD, ALITO, ROTH, and LEWIS, Circuit Judges, and POLLAK, District Judge* *Honorable Louis H. Pollak, Senior United States District Judge for the Eastern District of Pennsylvania, sitting by designation. 2a Appendix A The petition for rehearing filed by the appellants, Grupo Protexa, S.A., and Condux, S.A. de C.V., in the above captioned matter having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the court in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied. Judge Becker and Judge Hutchinson would grant rehearing by the court in banc. BY THE COURT: (illegible) Circuit Judge DATED: April 28, 1994 at had a A an a a Cena enn ans 3a APPENDIX B — OPINION OF THE UNITED STATES COURT OF APPEALS, THIRD CIRCUIT DATED MARCH 29, 1994 GRUPO PROTEXA, S.A. acompany organized under the laws of the Republic of Mexico; and Condux S.A. de C.V., a company organized under the laws of the Republic of Mexico Vv. ALL AMERICAN MARINE SLIP, A DIVISION OF MARINE OFFICE OF AMERICA CORPORATION, a New York Corporation; AFIA, a Delaware Corporation; CIGNA, a Delaware Corporation. Grupo Protexa, S.A., and Condux, S.A. de C.V., Appellants. No. 93-5332. United States Court of Appeals, Third Circuit. Argued Feb. 4, 1994 Decided March 29, 1994. Sur Petition for Rehearing April 28, 1994 * * * Kenneth M. Van Deventer (argued), Riker, Danzig, Scherer, Hyland & Perretti, Morristown, NJ, for appellants. Harold K. Watson (argued), Gregory F. Burch, Robin Beasley, Liddel, Sapp, Zivley, Hill & LeBoon, L.L.P., Houston, TX, David J. D’Aloia, Saiber, Schlesinger, Satz & Goldstein, Newark, NJ, for appellees. 4a Appendix B Before GREENBERG and Roth, Circuit Judges, and POLLAK, District Judge*. OPINION OF THE COURT GREENBERG, Circuit Judge. | I. INTRODUCTION This matter is before us on appeal from a judgment entered after we remanded the case to the district court when we reversed that court’s prior judgment. The case involves claims by insureds under a marine insurance policy to recover the cost of removing their sunken vessel from a bay off the coast of Mexico. The policy covered costs for a removal of a sunken vessel if the removal was “compulsory by law.” The insureds claimed they had acted under such compulsion because they were responding to an order to remove the wreck issued by the Mexican authorities. While certain of the several insurance carriers on the policy honored their claims, two denied liability. Thus, the insureds brought this action against those two companies. After a bench trial, the district court in a published opinion found in favor of the insurance companies on the ground that the removal was not “compulsory by law.” In reaching this conclusion, the district court adopted an analytical framework not requiring it to determine the validity of the removal order. The insureds appealed and we reversed the judgment of the district court, holding that it rested on incorrect conclusions of law. In particular we held that removal of the wreck would be “compulsory by law” if directed by a valid removal order. We then * Honorable Louis H. Pollak, Senior United States District Judge for the Eastern District of Pennsylvania, sitting by designation. AND in eh ERE tt RRR TNE oo Ce AR ta MTT RS DA GAT RTL el EE aiisineetnitassi. Sa Appendix B remanded the case for further proceedings. At a second bench trial, the district court incorporated its findings from the first trial and received additional evidence, including expert testimony concerning the validity of the order under Mexican and international law. In a subsequent unreported opinion, the district court held that the act of state doctrine did not bar the court’s inquiry into the validity of the order. It also held, in a determination the insurance companies do not challenge, that the order, which was ambiguous as to whether it required the removal, in fact included that requirement. Ultimately, however, the district court ruled in favor of the insurance companies, as it concluded that the order was invalid. The insureds again have appealed. We will affirm the district court’s judgment, as we hold that the act of state doctrine does not bar our inquiry into the validity of the removal order, the order was in fact invalid, and there is no other basis on which we may conclude that the removal was compulsory by law. II. BACKGROUND In our earlier opinion, Grupo Protexa, S.A. v. All American Marine Slip, 954 F.2d 130 (3d Cir.1992) (Protexa Appeal I), we extensively recited the facts of the case as found by the district court in its published opinion following the first bench trial. Grupo Protexta, S.A. v. All American Marine Slip, 753 F.Supp. 1217 (D.N.J.1990) (Protexa I). Furthermore, as we have indicated, the district court incorporated its findings from Protexa I into its unreported opinion following the second trial. Grupo Protexa, S.A. v. All American Marine Slip, No. 86-4212, 1993 WL 166275 (D.N.J. May 12, 1993) (Protexa II). Therefore, many of the facts already appear in these two published opinions, so we freely will quote from them in setting forth the background of the case.! 1. Inorderto make our opinion more readable, we usually will omit quotations marks of the quoted material as well as citations to the underlying opinions. We also in some instances will make nonsubstantive changes in the language quoted. 6a Appendix B The circumstances leading directly to this litigation may be traced to December 15, 1985, when the HUICHOL II (HUICHOL), a diving support vessel, sank with a large loss of life during a violent storm in the Bay of Campeche, an extension of the Gulf of Mexico, approximately 45 miles off the east coast of Mexico. The wreck of the HUICHOL came to rest 1.5 miles within the eastern border of the Petroleos Mexicanos’ (Pemex) oil exploratory zone. Pemex is the Mexican national oil company. This area, though not Mexican territorial waters, is within the internationally recognized Mexican Exclusive Economic Zone, which extends 200 miles off shore. The HUICHOL was owned by Condux S.A. de C.V., acorporation owned by Grupo Protexa, S.A. (Protexa). Condux and Protexa are Mexican corporations and are the insureds under the policy involved in this case. Protexa is in the business of constructing and servicing the pipelines, platforms, and related structures needed by Permex, and develops and manages these projects through Condux. For convenience, we will refer to the insureds together as “Protexa.” The HUICHOL was insured under a marine insurance policy with several layers of coverage. Under the policy, five percent of the risk was placed with a Mexican insurance company, and four primary-layer underwriters were responsible for the first $2,500,000 of covered loss. The excess-layer underwriters were responsible for losses exceeding $2,500,000. The excess-layer underwriters were All American Marine Slip (AAMS), which carried 30% of the excess layer, various Lloyds/London underwriters, which carried 65% of the excess risk, and CIGNA/ AFIA, which had 5% of the excess layer. The insurance policy contained a standard wreck removal provision covering expenses Protexa incurred in the “removal of the wreck of the vessel . . . when such removal is compulsory by law.” (emphasis added.) AES nae it WS! Sy ee ee ee " Ta Appendix B Protexa’s insurance broker was notified on December 16, 1985, that HUICHOL had sunk the day before. The broker, acting as liaison between the underwriters and Protexa, then called in a specialized firm to survey the damage, adjust the loss, and prepare a written report for the underwriters. The representative from this marine surveying firm arrived at the wreck on December 16, 1985. On the same day, the insurance broker notified the underwriters on the policy, including AAMS and CIGNA/AFIA, that the HUICHOL had sunk and that it had called in the marine surveying firm. When the marine surveying firm’s representative arrived at the wreck he met with the various parties involved. Because the wreck lay in a Pemex zone of heavy drilling activity, and he believed that the Mexican government would want to remove the bodies of the deceased seamen and conduct an investigation, he concluded that the vessel would have to be removed. The broker then sent a telex dated December 17, 1985, to Protexa suggesting that if the wreck were to be raised and moved, an immediate investigation should commence to determine if the removal was compulsory by law. The telex advised that a valid order of removal would have to be in writing and be issued by an authorized governmental authority. Immediately after the sinking, the Mexican Procuraduria General de la Republica ordered an investigation of the sinking. On December 17, 1985, the Port Captain for Ciudad del Carmen and the offshore port of Cayo Arcas issued a written order that, according to the English translation, required Protexa to post a bond “to guarantee the cleaning up of the area and the salvaging of [the] Vessel.”? Protexa Appeal I, 954 F.2d at 132-33. Ciudad del 2. Wehave repeated the full text of the order in the appendix to this opinion. 8a Appendix B Carmen is a city Carmen is a city on the mainland near the place where the HUICHOL sank. Protexa’s representative interpreted the Port Captain’s order as requiring immediate removal of the wreck, and on the same day the order was issued, he so notified Protexa’s insurance broker and requested an immediate meeting so that the broker could present the removal order to the underwriters. The insurance broker notified all the underwriters, including AAMS and CIGNA/AFIA, of the removal order. Protexa also wanted to present its proposal to perform the removal without resort to a third-party salvor. The broker, the marine surveying representative and Protexa’s representative met in Houston on December 18, 1985, where they agreed that the order appeared to require removal of the wreck and that Protexa’s proposed removal plan was sound. The broker attempted to telephone the underwriters to discuss the proposed plan, but was able to contact only three of them, not including AAMS or the Lloyds/London underwriters. The broker explained to the underwriters the circumstances of the removal order and the need for beginning removal of the wreck without delay in order to minimize expenses. The underwriters he reached agreed to waive any requirement that Protexa obtain a second or third salvage bid, and advised that Protexa should begin work immediately to avoid further complications and costs.’ Protexa presented the underwriters with two alternatives regarding the costs of removal: (1) a fixed-sum bid to remove the wreck for $3,785,000 or (2) a daily rate of $224,608 for an 3. Prior to this meeting and telephone contact with the underwriters, the broker sent Protexa a telex strongly suggesting that Protexa obtain at least one, and preferably two, outside bids for the salvage of the vessel. He also reminded Protexa of its obligation to act as a prudent uninsured. tis ick age ie PRA LTE RD NARA SAAR TED BEN Sa 9a Appendix B estimated period of 24 days, resulting in a cost of approximately $5.4 million. The marine surveying representative sent these offers to the underwriters by telex on December 19, 1985, and the wreck removal operation began on that day. By December 20, 1985, all of the underwriters except AAMS and CIGNA/AFIA had agreed to the lump-sum bid predicated on there being a consensus in favor of this option. CIGNA/AFIA took no position, and AAMS, instead of accepting either of the alternatives posed by Protexa, responded by advising that all necessary steps should be taken to minimize the loss. Furthermore, AAMS expressed its desire to have a third-party salvor involved to the extent possible in the removal of the wreck. Inasmuch as AAMS and CIGNA/AFIA had not approved the lump-sum bid, the broker and the marine surveying representative told Protexa that it should consider the job to be on a day-rate basis. On December 20, 1985, a Protexa staff attorney, Jorge Uriarte, whom Protexa chose to review the Port Captain’s order, arrived in the port of Carmen. Upon his arrival he was told of the Port Captain’s order, of the underwriters’s approval of Protexa to raise the wreck, and of an imminent meeting with family members of the crew to announce that Protexa would be raising the wreck. Nevertheless, before Protexa started wreck removal, it wanted to rule out the possibility of a legal challenged to the order.‘ After a 45-minute review of the order and the statutes which defined the office of the Port Captain and the duties of his office, Uriarte concluded that “it was clear beyond a doubt that the order had to be complied with.” Uriarte then visited the office of the Port Captain in an effort to obtain suspension or rescission of the order but was informed that any such relief would have to be sought from officials in Mexico City. He also was informed that the Port Captain expected removal to begin without delay or the navy 4. Protexa actually started removing the wreck before Uriarte reached Carmen. 10a Appendix B would take over the removal and Protexa would be punished to the full extent of the law. In addition to providing Protexa with an opinion as to the validity of the removal order, Uriarte listed five potential consequences that could result from noncompliance: (1) if Protexa did not begin removal of the vessel immediately, the Mexican government could arrange to have the wreck removed and present Protexa with the bill; (2) Protexa faced the potential for catastrophic liability to third parties for any damage resulting from movement of the wreck within the oil field; (3) Protexa would face potential sanctions or fines, which could be imposed on a sliding scale, for failure to comply with the removal order and to cooperate with the investigation; (4) Protexa risked forfeiture of the vessel and the bond; and (5) Protexa risked the destruction of its goodwill with the government and with Pemex if it failed to comply with the order. After concluding that the removal order was valid and, after weighing the potential consequences of non-compliance, Protexa decided not to challenge the order. Although Protexa initially estimated that removal of the wreck would take about three weeks, the operation ran into several problems and progress was exceedingly slow. But Protexa lifted and suspended the wreck in a crane on February 10, 1986. Eventually, Protexa placed the wreck on the sea bottom in shallow water outside the oil exploratory zone. After Protexa completed the removal, the marine surveying firm prepared its final proof of loss and forwarded copies to all the underwriters. The total adjusted loss was $12,121,726, with the first $2,500,000 paid by the primary-layer underwriters, thereby leaving a balance of $9,631,726, 5% of which remained with the Mexican insurer. The Lloyds/London underwriters, which lla Appendix B satisfied their portion of Protexa’s claim, owed and paid 65% of the remaining 95% of $9,631,726. Thus, if liable, AAMS and CIGNA/ AFIA respecticely would owe 30% and 5% of the remaining 95%. Both AAMS anc CIGNA/AFIA, however, denied Protexa’s claim. Protexa filed a complaint in the United States District Court for the District of New Jersey against AAMS and CIGNA/AFIA, and subsequently moved for summary judgment, contending that it could recover the removal costs because the removal was “compulsory by law.” Relying on cases construing this standard policy language, Protexa argued that the Port Captain’s order in itself established conclusively that the removal was compulsory by law. Protexa also maintained that the act of state doctrine precluded the court from questioning the Port Captain’s authority to order the removal. AAMS and CIGNA/AFIA filed cross-motions for summary judgment. They argued that the cases adopted a balancing test of reasonableness in which three factors: the likelihood of exposure, the sanctions for failure to remove, and the cost of removal, must all be examined in order to determine if removal was compulsory by law. Thus, they maintained that even a valid removal order would not show conclusively that removal was compulsory by law. They argued, however, that the Port Captain’s order was invalid, and that therefore there was no likelihood of exposure to sanctions for failure to remove the HUICHOL. They also contended that the act of state doctrine was inapplicable, and thus that they could challenge the validity of the order. In an unpublished opinion filed on August 26, 1988, the district court denied both motions for summary judgment. The case proceeded to a bench trial, following which the court , in Protexa I explained its interpretation of when removal is compulsory by law: 12a Appendix B {T]he determination of whether removal of a vessel was ‘compulsory by law’ must be decided by looking to the state of affairs as they would appear to a reasonable owner under the circumstances and examining whether failure to remove a wreck would likely expose such owner to liability imposed by law sufficiently great in amount and probability of occurrence to justify the expense of removal. In other words, in this action, would a reasonable owner faced with the Port Captain’s December 17, 1985 Order (the ‘Order’), determine that failure to remove the HUICHOL would likely expose it to liability imposed by law sufficiently great in amount and probability of occurrence to justify the expense of removal. Protexa I, 753 F.Supp. at 1230. Under this formula, the district court believed that the absence of governmental authority to order removal of the wreck would not be necessarily issue-dispositive but rather would be merely one of the factors the court would consider in determining whether removal of the HUICHOL had been compulsory by law. Jd. at 1228. Consequently, the district court assumed without deciding that the Port Captain’s removal order was valid, and the court did not confront the act of state doctrine. /d. at 1228. Nevertheless the court held for the insurance companies, as it concluded that the removal was not compulsory by law under the foregoing formula. The court stated that “no phrase in the body of the [Port Captain’s] order direct[ed] wreck removal.” Jd. at 1232- 33. The court observed that the order instead merely required the posting of a bond. /d. at 1233. The court suggested that Protexa did not consider adequately the possibility of challenging the order. In 13a Appendix B this regard it pointed out that inasmuch as Uriarte had no training in the applicable areas of law, did not obtain expert advice, and concluded that the order was valid after only cursory review, he was not prepared properly when he met with the Port Captain. /d. at 1233-34. In addition, the court found that the potential sanctions for noncompliance with the order and the potential liability to third parties were much less than the cost of removal. /d. at 1236. Furthermore, the court suggested that factors other than legal compulsion—pressure from the families of the deceased seamen and the possible commercial consequences of noncompliance— influenced Protexa’s decision not to resist the Port Captain’s order. Id. at 1232. Protexa then filed its first appeal to this court. We reversed the judgment of the district court and remanded for further proceedings. Protexa Appeal I, 954 F.2d 130. We first addressed whether removal of the HUICHOL was “compulsory by law,” and in this undertaking we reviewed four opinions of courts of appeals interpreting the phrase as used in a standard clause in marine insurance contracts. See Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500 (2d Cir.1972); Progress Marine, Inc. v. Foremost Ins. Co., 642 F.2d 816 (Sth Cir.), cert. denied, 454 U.S. 5. Thecourt also held for the insurance companies on a second ground. As we explained in Protexa Appeal I: “The court next held that even if the removal had been ‘compulsory by law,” Protexa was not entitled to recover due to a policy provision that the court interpreted to mean that Protexa lost all right to recovery if it breached its duty to act as a prudent uninsured. The court found that Protexa violated this duty [w]hen [it] acted as its own salvor.’ [753 F.Supp.] at 1237. Among other things, the court noted that ‘Protexa had no experience in deep water wreck removal operations,’ ignored AAMS’ request that a third-party salvor be involved as much as possible, ignored bids by experienced salvors that were much lower than Protexa’s costs, did not properly execute its removal plan, and failed to implement recommendations by an experienced salvor. /d. at 1237-39.” 954 F.2d at 135. This ground of the district court’s first decision is not at issue in the present appeal. l4a Appendix B 860, 102 S.Ct. 315, 70 L.Ed.2d 158 (1981); Continental Oil Co. v. Bonanza Corp., 706 F.2d 1365 (Sth Cir.1983); and East Coast Tender Serv., Inc. v. Robert T. Winzinger, Inc., 759 F.2d 280 (3d Cir.1985). Ultimately, we determined that removal may be considered compulsory by law in any «“ three circumstances: (1) if it is directed by government order; (2) if it is required by statute or regulation; or (3) if “a reasonable shipowner at the relevant time would determine that the probable cost of removal would be less than the probable tort liability if removal was not undertaken.” 954 F.2d at 138. Consequently, we reversed the judgment of the district court because it had adopted a test different from our interpretation of the case law and had assumed the validity of the order and yet found for the insurance companies. Inasmuch as a removal directed by a government order is compulsory by law, we stated that “if the Port Captain’s order in this case was a valid removal order, Protexa was entitled to recover under the policy provision in question.” 954 F.2d at 138. We therefore remanded the case for a finding of whether the order required removal and a determination of the validity of the order.® Inasmuch as we remanded the matter to the district court to determine the validity of the order, we did not pass on the insurance companies’ contention that the Port Captain lacked the authority under Mexican law and under the United Nations Convention on the Law of the Sea (UNCLOS) to order the removal of the wreck. 6. Because it did not need to address the issue under the analytical framework it had adopted, the district court had not made the initial determination as to whether the removal order was in fact an order to raise the wreck, as opposed to an order merely to post a bond. In remanding on this issue, we noted that under Fed.R.Civ.P. 44.1, expert testimony may be introduced regarding Mexican law to aid the court in interpreting the Port Captain’s order. See Merck & Co. v. U.S. Int'l Trade Comm'n, 774 F.2d 483, 488 (Fed.Cir. 1985). 15a Appendix B Furthermore, we did not address the merits of Protexa’s argument that the act of state doctrine precluded an American court from inquiring as to the validity of the Port Captain’s order. The district court was to determine that issue, too, on the remana, on which it would also decide whether the Port Captain’s order directed removal of the wreck. Protexa Appeal I, 954 F.2d at 139.’ On remand, the district court in its unpublished opinion, Protexa II, again found for the insurance companies. The court first 7. However, we did note that “[tJhe act of state doctrine does not preclude a court from determining whether in fact a government official directed certain action. See [W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 409, 110 S.Ct. 701, 706-07, 107 L.Ed.2d 816); Interamerican Refining Corp. v. Texaco Maracaibo, Inc., 307 F.Supp. 1291, 1301 (D.Del. 1970) (‘whether or not a foreign official “ordered” certain conduct is an evidentiary question’ not prohibited by the act of state doctrine).” 954 F.2d at 139 n. 5. The district court’s second and independent reason, see footnote 5, supra, that Protexa did not act as a prudent uninsured, for entering judgment for the insurance companies is not at issue in the present appeal. However, in respect to this point, we held that the district court erred in interpreting a provision in the contract to mean that Protexa lost all right to recover any removal costs when it breached its duty to act asa prudent uninsured. /d. at 139-40. Instead, we found that the language relied upon by the district court appeared to refer only to the setiement of claims and not to the issue of coverage. Id. at 140. Therefore, although we held that the district court’s findings that Protexa’s removal operation was highly inefficient were not clearly erroneous, we stated that Protexa’s inefficiency did not totally preclude recovery of removal costs. /d. at 141. We stated, however, that “the policy provision on removal may well be restricted to reasonable removal costs, and it is not apparent from Protexa’s briefs that it disputes such an interpretation.” /d. at 140. Consequently, we also remanded for the district court to “determine the meaning of this provision and, if the provision is limited to reasonable costs, [to] make findings regarding the amount of those costs.” Id. Of course, the district court on remand did not have to reach this issue. 16a Appendix B made the now unchallenged finding that the Port Captain’s order was a directive to raise the HUICHOL. The court further stated that “[w]hile arguably the act-of-state doctrine could be applied here, caution and fundamental fairness counsel against the use of this judicially fashioned remedy.” Jd. at 140. The court held that the policies underlying the doctrine were not implicated in this case and that “for reasons of fair play and fundamental justice,” Protexa should not be permitted to utilize the doctrine “as a sword rather than a shield” to bar the insurance companies from asserting a defense that the order was invalid.* Finally, the court determined that the Port Captain’s order was invalid under Mexican law and therefore could not constitute legal compulsion under the policy. The court therefore entered judgment for the insurance companies on May 14, 1993. Protexa again appeals. We have jurisdiction under 28 U.S.C. § 1291, and we apply a plenary standard of review to the district court’s interpretation of the insurance policy and its application of controlling legal principles, as the facts germane to the resolution of this matter are not in dispute. See New Castle County v. Hartford Accident and Indem. Co., 933 F.2d 1162, 1183 (3d Cir.1991).9 “However, ‘in reviewing factual findings made by a district court, we apply the clearly erroneous standard set out in Fed.R.Civ.P. 52(a).’ ” fd. (quoting Goodman v. Lukens Steel Co., 777 F.2d 113, 8. Id. 954 F.2d at 141. Resting its decision with respect to the act of state doctrine on these points, the court did not reach the insurance companies’ argument that the act of state doctrine should not apply because the order directed activity outside of Mexican territory. 9. Neither party suggests that we must be concerned with the somewhat elusive distinction between construction and interpretation on this appeal, see Ram Constr. Co. v. American States Ins. Co., 749 F.2d 1049, 1052-53 (3d Cir. 1984), and, as we are affirming the judgment, Protexa, as the appellant, cannot be prejudiced by our exercise of plenary review. saat iti aiaiaaiea atte 17a Appendix B 128 (3d Cir.1985), aff’d, 482 U.S. 656, 107 S.Ct. 2617, 96 L.Ed.2d 572 (1987)). We will affirm the judgment of the district court. Ill. COMPULSORY BY LAW We first address Protexa’s argument that the district court erred in basing its decision on the remand on the finding that the order was invalid. According to Protexa, the case law construing the phrase “compulsory by law” provides that legal compulsion may be found through a “rule of reason” analysis, in which the technical invalidity of the removal order does not necessarily dispose of the coverage issue. Protexa states that the appropriate inquiry under this broader interpretation is whether a reasonable insured shipowner in circumstances such as those in this case would conclude that “removal was reasonably required by law, or . . . failure to remove would have reasonably exposed [the] insured to liability imposed by law sufficiently great to justify the expense of removal.” Protexa Br. at 12 (quoting Progress Marine, Inc., 642 F.2d at 820). Consequently, Protexa argues that even if the removal order was “technically invalid,” Protexa still reasonably was required by law to remove the wreck because it believed it had to comply with the order. Therefore, it is entitled to recover under the policy. This argument makes liability dependent on Protexa’s subjective state of mind. The insurance companies respond that our prior opinion determined the law of the case, namely, that “removal of the HUICHOL was ‘compulsory by law’ if removal was directed by a valid order of the Port Captain.” Protexa Appeal I, 954 F.2d at 141. They therefore contend that Protexa’s argument is barred because Protexa is arguing, based solely on the invalid removal order, that removal was nevertheless compulsory by law because Protexa reasonably believed it had to obey the order. The insurance 18a Appendix B companies then state that under the case law Protexa must either show that the removal order was valid, or else meet the balancing test and show that the likelihood and severity of sanctions justified the cost of removal. AAMS Br. at 11. While it might appear that the insurance companies’ balancing test is not significantly different from the test advanced by Protexa, in fact it is more demanding, as it is objectively based. Of course, the district court rejected Protexa’s claim under the objective balancing test at the first trial when it held that the potential sanctions for noncompliance with the order and potential liability to third parties were much less than the cost of removal of the wreck. We did not disturb these findings in Protexa Appeal I, and the district court adopted these findings at the second trial. Thus, if the objective balancing test is adopted, Protexa can prevail only if it can successfully challenge those findings, or if the removal was compulsory by law because the order was valid, or if the insurance companies are barred by the act of state doctrine from challenging the validity of the order. Even assuming Protexa is not foreclosed by the law of the case from advancing its argument that the removal was compulsory by law on the ground that it reasonably complied with the removal order, we do not read the case law to support the application of a “rule of reason” analysis of the subjective sort Protexa advances. It appears that Protexa has misconstrued the meaning and application of certain language in Progress Marine to call for an improper examination into its corporate state of mind. Protexa is correct in stating that this court and the Court of Appeals for the Fifth Circuit have adopted a test for determining whether removal is “compulsory by law” that encompasses cases beyond the per se rule of a valid governmental order. However, in eScchb aebvileal ap hao th ebb ining atta ae 19a Appendix B quoting Progress Marine to support its argument that it believed “removal was reasonably required by law,” Protexa has taken this phrase out of its original context and given it a much broader, unintended meaning: Rather, as we discuss below, the phrase refers specifically to a situation in which there are particular statutes and/ or regulations which direct the insured to remove a wreck even though a removal order has not been issued. Alternatively, the phrase refers to a situation in which the costs which would flow from not removing the wreck would justify the expenditure to remove it. In Progress Marine, the Court of Appeals for the Fifth Circuit adopied an interpretation of the phrase “compulsory by law” going beyond the restrictive interpretation of the Court of Appeals for the Second Circuit that a removal was compulsory by law if directed by a governmental order. See Seaboard Shipping Corp., 461 F.2d at 504. As we explained in Protexa Appeal I, in Progress Marine a barge sank about 11 miles off of the Louisiana coast, the hurricane season was approaching, and the submerged barge posed a threat both to navigation and to neighboring oil production facilities and workers. But there was no governmental order requiring removal. Protexa Appeal I, 954 F.2d at 136. In holding that compulsory by law is not restricted to situations in which a direct government order has been issued, the Progress Marine court expanded the term to encompass situations in which “removal was reasonably required by law, or where failure to remove would have reasonably exposed an insured to liability imposed by law sufficiently great to justify the expense of removal,” 642 F.2d at 820 (emphasis added). By a situation in which “removal was reasonably required by law,” the court referred to statutory or regulatory sources of law which arguably required removal. As a demonstration of this understanding, the Progress Marine court went on to discuss the various statutes and possible tort actions that the barge owner 20a Appendix B reasonably could have believed either compelled him to remove the barge or subjected him to potential tort liability for “enormous damages.” 642 F.2d at 820-21. Furthermore, we already have stated explicitly that the phrase “reasonably required by law” in Progress Marine refers specifically to statutory or regulatory duties. In East Coast Tender Serv. we recounted the Progress Marine holding by quoting the phrase “reasonably required by law” and inserting bracketed language stating: “[i.e., a legal duty imposed by statute].” East Coast Tender Serv., 759 F.2d at 286.'° Applying this analysis, we addressed the argument that the charterer of barges sunk in the Delaware River was compelled to remove them by New Jersey trespass and nuisance statutes requiring removal of sunken barges from state riparian lands. Jd. 759 F.2d at 285-87. Finally, in Continental Oil the Court of Appeals for the Fifth Circuit held that “[r]emoval of a wreck is not compulsory by law unless there is a clear legal obligation to remove, imposed by statute or by judicial decision, on the party who effects removal.” Continental Oil, 706 F.2d at 1377 (emphasis added). Because the insured had not demonstrated that there was such an obligation or that governmental authorities had ordered removal of the wreck, 10. The full quote stated: The court concluded that removal is ‘compulsory by law’ when it is ‘reasonably required by law, [i.e., a legal duty imposed by statute], or where failure to remove ... reasonably expose(s] an insured to liability imposed by law sufficiently great to justify the expense of removal. ...’ Id. East Coast Tender Serv., 759 F.2d at 286. $ : 3 2la Appendix B the court held that removal was not covered by the insurance policy in question. Jd. In making its analysis, the court again looked to possible statutory and judicial bases for imposing both criminal and civil liability upon the insured. Thus, we believe that Protexa mistakenly has construed the language of the case law too broadly to embrace a “rule of reason” analysis of the subjective sort it describes. Rather, contrary to Protexa’s position, the language it quotes from Progress Marine refers to the second two elements of the test for determining whether removal was subject to legal compulsion which we recognized in Protexa Appeal I, i.e., removal required by statute or regulation or by the objective balancing test involving a comparison of the costs of removing and not removing the wreck." Of course, in this case there is no self-executing statute or regulation requiring removal and the district court in unassailable 11. In Protexa Appeal I, after reviewing the Seaboard Shipping Corp., Progress Marine, Continental Oil, and East Coast Tender decisions, we stated: In sum, we interpret all of the decision described above to mean that removal is ‘compulsory by law’ if it is directed by government order. Our decision in East Coast Tender Serv., and the two earlier Fifth Circuit decisions interpret this phrase to encompass additional cases, viz., those in which removal is required by statute or regulation, and those in which a reasonable shipowner at the relevant time would determine that the probable cost of removal would be less than the probable tort liability if removal was not undertaken. Accordingly, if the Port Captain’s order in this case was a valid removal order, Protexa was entitled to recover under the policy provision in question. Protexa Appeal I, 954 F.2d at 138 (emphasis original). 22a Appendix B findings rejected Protexa’s claim under the objective balancing test. Thus, Protexa can establish that the removal was compulsory by law only if it can establish that the Port Captain’s order was valid. Because we have determined that the district court was not compelled by precedent to engage in a “rule of reason” analysis of the sort advocated by Protexa, we do not need to determine whether Protexa could recover if that test were applicable. However, we note that Protexa’s argument that an apparently legal order may alone create legal compulsion seems problematic for several reasons. First, our opinions in East Coast Tender and Protexa Appeal I do not make any reference to giving weight to the facial validity of a removal order. Second, in Continental Oil the Court of Appeals for the Fifth Circuit specifically eliminated what was originally a subjective component to the Progress Marine test,"* and it appears to us that Protexa’s argument would revive such an inquiry. Third, even if a subjective “rule of reason” analysis were appropriate, the factual findings of the district court demonstrate that Protexa did not take the steps necessary to arrive at a reasonable conclusion as to the validity of the removal order once it had been issued." The situation the district court described 12. The subjective element of the Progress Marine test had inquired “whether removal was performed as a result of a subjective belief on the part of the insured that such was reasonably necessary . . . .” Continental Oil Co., 706 F.2d at 1371 (quoting Progress Marine, 642 F.2d at 820). 13. Weneed merely accept the district court’s factual findings to arrive at this understanding. The district court was very critical of the actions of the Protexa attorney who reviewed the order, determined its validity, and recommended that it should not be challenged: Uriarte’s review of the Order and the applicable statutes (Cont'd) 2 i nici tee es oie Pie iS web eVAS Ket hci ert baa a 23a Appendix B in its findings on this point can be contrasted to the procedures (Cont'd) contained in the Order occurred within the span of 45 minutes. He then concluded the Order was valid and he and other Protexa representatives announced to those assembled that the wreck would be removed. Uriarte had no training in admiralty law and was unfamiliar with the United Nations Convention of the Law of the Sea. He also failed to engage in an effort to seek the counsel of someone who in fact did possess maritime legal experience. At this point in time Protexa anticipated spending a minimum of $3,785,800 to a maximum of $5,390,592 for wreck removal and relief upon nothing more than an oral opinion from a staff attorney. For Protexa to proceed in this fashion is not only extraordinary but incredible and casts serious doubt on the exercise of its corporate judgment. Protexa I, 753 F.Supp. at 1233. Moreover: Uriarte’s visit to the Port Captain’s office was a pro forma appearance but of little substance. He was so ill- prepared and uninformed that his application was doomed to failure even before it war presented. For example, he was unaware of whether the Mexican government had any means at its disposal to remove the HUICHOL. He did not know what a third-party salvor would charge to remove a wreck. No one at Protexa had told him what it was going to cost Protexa to remove the wreck. He was unaware that three miles separated the HUICHOL from a Pemex platform or related structure. In terms of sanctions, he admitted that forfeiture of the HUICHOL to the government was not a sanction that required the Order to be obeyed. Protexa further stipulated that the threat of fines was not the primary motivating factor for the removal of the wreck. Without (Cont'd) 24a Appendix B normally followed in a wreck removal situation, as described in the expert testimony at the first bench trial. See Protexa I, 753 F.Supp. at 1233-36. Even though we do not accept Protexa’s argument that an apparently valid order can created legal compulsion, we recognize that Protexa has raised a significant point, viz., that the actions of a party faced with such an order should not be evaluated ex post according to a standard stricter than that applied under the objective balancing test to an insured’s actions in removing a wreck when no order has been issued. We do not understand case law as having foreclosed the possibility that an apparently valid removal order, ultimately determined to be invalid, can be factored into the objective test of balancing probable liability versus removal costs to determine legal compulsion. While discussions of probable liability in the cases we have cited focused on tort liability, none of the courts dealt with a case in which there had been a removal order. Thus, although we now do not decide the issue conclusively, it would seem reasonable to factor the probable sanctions for disobeying an ostensibly valid removal order into the balancing test for determining whether removal is compulsory by law, and (Cont'd) further belaboring this opinion with Uriarte’s cross- examination, it is important to note that he did not make a technical presentation to the Port Captain pertaining to the wreck constituting a hazard to navigation. The commercial and moral implications that AAMA asserts motivated Protexa to remove the wreck are documented in Uriarte’s cross-examination. Id. 753 F.Supp. at 1234 (citations totrial transcript omitted). 25a Appendix B this opinion should not be taken as foreclosing that possibility. Hence, removal could be considered “compulsory by law” even in the face of a government order later determined to be invalid, so long as on an objective analysis the reasonable costs of disobeying the order and the probable tort liability outweighs the removal expenses. Nevertheless if we apply this standard and factor the existence of the removal order into the objective balancing equation, we still would not consider that the removal of the HUICHOL was “compulsory by law.” We predicate this conclusion on the finding of the district court in Protexa J that even assuming the removal order was valid, Protexa did not satisfy the balancing test the court applied." We reiterate that although we reversed the district court’s original judgment on the ground that it applied an improper standard, we now accept its findings of fact that supported its 14. Thedistrict court stated: The sanctions [envisioned by Protexa in making its decision] were in fact meaningless and lacked persuasive value. Removal of the HUICHOL by the Mexican government or through a third-party salvor in light of the [very high] Protexa-estimated cost of removal was no sanction. The potential for catastrophic liability to third- parties if the wreck were to move within the oil field was remote, particularly in view of the three mile distance between the wreck and any Pemex installation . . . . The sanctions of fines and the risk of loss of the bond amounted to approximately $50,000. They could not in this factual scenario, either individually or cumulatively, amount to a sanction. ProtexaI,753 F.Supp. at 1236. 26a Appendix B determination, as the district court’s opinion on the remand readopted these fully justified findings. Protexa II at 5. | In reaching our result that the removal was not compulsory by law under the objective balancing test, we have not lost sight of the fact that the sinking of the HUICHOL was a tragic event. We well understand why Protexa believed it should raise the wreck. However, we must stress that the issue before us is whether or not Protexa is entitled to recover the costs of removing the wreck under its insurance policy. Although Protexa clearly was under tremendous moral and commercial pressure to raise the wreck, see Protexa I, 753 F.Supp. at 1228, these factors do not tend to establish that removal was compulsory by law under the terms of the insurance policy. Accordingly, inasmuch as we reject Protexa’s case insofar as based on the objective balancing test, Protexa can only recover if the order is unassailable under the act of state doctrine or if it was in fact valid. Thus, we now turn to Protexa’s argument that the act of state doctrine prohibits judicial inquiry into the validity of the order. IV. ACT OF STATE As we have indicated, in Protexa Appeal I we did not determine whether the act of state doctrine barred the insurance companies from challenging the validity of the removal order. On the remand, the district court addressed the issue and held that “(while arguable the act-of-state doctrine could be applied here, caution and fundamental fairness counsel against the use of this judicially fashioned remedy.” Protexa II at 40. In its analysis, the court first stated that the policies underlying the doctrine — “international comity, respect for sovereign nations on their own territory and deference to the 27a Appendix B executive branch in the administration of foreign policy” — were not implicated inasmuch as this case involves an insurance dispute between private parties of no interest to the governments of Mexico or the United States or to the international community.’° Second, the district court found the doctine inapplicable, because Protexa was attempting to use it “as a sword rather than a shield.” Id. at 41. The court interpreted the case law as teaching that for reasons of fair play and fundamental justice, a court is reluctant to invoke the doctrine on behalf of a party seeking relief. In this regard it noted that Protexa chose to bring the action in federal district court in New Jersey, and thereby deprived a Mexican court of the opportunity to adjudicate the validity of what to that court would have been a domestic order, the review of which could not have implicated the act of state doctrine. Thereafter Protexa defended its selection of an American forum by resisting the insurance companies’ motion to dismiss predicated on forum non conveniens. The district court held that in these circumstances “it would be unjust to permit Protexa the benefit of an American forum and the protection of a doctrine that would unfairly impede the defendants in their ability to assert a defense.” Jd. in view of these conclusions the court did not reach a contention advanced by the insurance companies that the doctrine by its terms could not be applicable, as the order of remand directed conduct to be taken outside of Mexican territory. On this appeal Protexa again argues that the act of state doctrine applies, so that the Port Captain’s order must be 15. The court stated that the decision of the Port Captain on a purely local matter eventually will determine who will pay for the wreck removal, and that in examining the validity of this decision the court “is not creating principles of domestic and international law, but is applying them as they have been promulgated by their respective entities.” Jd. at 41. ; 28a Appendix B considered a valid act of the Mexican government. Protexa contends that this case involves more than a mere insurance coverage dispute for several reasons. First, it claims that the district court ruled as a matter of law that the Mexican government does not possess the legal right to order a Mexican corporation to raise its own wreck from offshore oil fields under Mexico’s jurisdiction. Second, Protexa claims that an issue of Mexican policy is at stake, namely, that nation’s powers within the 200-mile Exclusive Economic Zone (EEZ). The EEZ is a maritime boundary established under UNCLOS, and comprises an area beyond and adjacent to the territorial sea, subject to the specific legal regime set forth in UNCLOS. Protexa also correctly notes that the sinking immediately caught the government’s attention, leading to the removal order. Protexa further reasons that Mexico has not demonstrated more recent interest in the implementation of the Port Captain’s order because Protexa complied with it. Consequently, Protexa asserts that the decision of the district court represents “a breathtaking intrusion into matters of Mexican s~vereignty and jurisdiction in its EEZ and over its own citizens” «that it was clear error for the court not to apply the doctrine. Protexa Br. at 21. Protexa also argues that the trial court invented a fairness exception to the doctrine “without precedent in any controlling case law” and “clearly contrary to the mandate of the act of state doctrine.” Jd. at 21. Rather, Protexa claims, the history of the doctrine shows that the judicially-created act of state doctrine puts the interests of amicable and orderly relations between nations before considerations of fairness to private litigants. Thus, Protexa asserts that the doctrine would be ineffective if it could be circumvented simply because its implementation would be unfair to the party prevented from challenging the act of the foreign state. 29a Appendix B Finally, Protexa responds that its choice of an American forum was entirely appropriate. It points out that the insurance companies are United States corporations with no assets or presence in Mexico, the insurance policy was issued by an agent in the United States for a premium in United States dollars, and the final adjustment was undertaken by a United States firm and determined in dollars. Furthermore, Protexa observes that even if it obtained jurisdiction over the insurance companies in Mexico, it still would have to execute any judgment it obtained in the United States. Protexa Br. at 23-24. We therefore turn to an analysis of the act of state doctrine and its applicability in this case. As we have stated: Under the [act of state] doctrine, the courts of this country will refrain from judging the validity of a foreign state’s governmental acts in regard to matters within that country’s borders. Environmental Tectonics v. W.S. Kirkpatrick, Inc., 847 F.2d 1052, 1057-58 (3d Cir. 1988) (citations omitted) (Environmental Tectonics Circuit Op.), aff'd, W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., 493 U.S. 400, 110 S.Ct. 701, 107 L.Ed.2d 816 (1990) (Environmental Tectonics S.Ct. Op.). “The act of state doctrine is not some vague doctrine of abstention but a ‘principle of decision binding on federal and state courts alike.’ . Environmental Tectonics S.Ct. Op., 493 U.S. at 406, 110 S.Ct. at 705 (quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427, 84 S.Ct. 923, 940, 11 L.Ed.2d 804 (1964)). “Act of state issues only arise when a court must decide — that is, when the outcome of the case turns upon — the effect of official action by a foreign sovereign.’ Environmental Tectonics S.Ct. Op., 493 U.S. at 406, 110S.Ct. at 705. 30a Appendix B Regardingthe foundation of the doctrine, the Supreme Court has explained: This Court’s description of the jurisprudential foundation for the act of state doctrine has undergone some evolution over the years. we once viewed the doctrine as an expression of international law, resting upon ‘the highest considerations of internation comity and expedience,’ Oetjen v. Central Leather Co., 246 U.S. 297, 303-304, 38 S.Ct. 309, 311, 62 L.Ed. 726 (1918). We have more recently descibed it, however, as a consequence of domestic separation of powers, reflecting ‘the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder’ the conduct of foreign affairs, Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84S.Ct. 923, 937, 11 L.Ed.2d 804 (1964). Environmental Tectonics S.Ct. Op., 493 U.S. at 404, 110 S.Ct. at 704. “Therefore, the application of the doctrine depends on the likely impact on international relations that would result from judicial consideration of the foreign sovereign’s act.” Allied Bank Int’l v. Banco Credito Agricola de Cartago, 757 F.2d 516, 520-21 (2d Cir.), cert. dismissed, 473 U.S. 934, 106 S.Ct. 30, 87 L.Ed.2d 706 (1985). “For this reason, the Supreme Court has not laid down rigid rules to govern the doctrine’s application, but leaves it to the lower courts to determine whether a conflict between the judicial and political branches exists in a particular case.” Environmental Tectonics Circuit Op., 847 F.2d at 1058. “If adjudication would embarrass or hinder the executive in the realm of foreign relations, the court should refrain from inquiring into the validity of the 3la Appendix B foreign state’s act.” Allied Bank Int'l, 757 F.2d at 521 (citing Sabbatino, 376 U.S. at 427-28, 431-33, 84 S.Ct. at 939-40, 941-43; Garcia v. Chase Manhattan Bank, 735 F.2d 645, 651 (2d Cir. 1984)). We acknowledge that, as the district court recognized, the act of state doctrine arguably is applicable in this case. However, “sometimes, even though the validity of the act of a foreign sovereign within its own territory is called into question, the policies underlying the act of state doctrine may not justify its application.” Environmental Tectonics S.Ct. Op., 493 U.S. at 409, 110 S.Ct. at 706. Assuming for purposes of this discussion that the insurance companies’ extra-territorial argument is erroneous, we believe that this is such a case, in that the rationale supporting application of the doctrine is not present here. Therefore, we hold that the act of state doctrine does not bar inquiry into the validity of the Port Captain’s order. As we have stated, the party invoking the act of state doctrine has the burden to prove its applicability. Environmental Tectonics Circuit Op., 847 F.2d at 1058 (“The party moving for the doctrine’s application has the burden of proving that dismissal is an appropriate response to the cizcumstances presented in the case.”); see also Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 694, 96 S.Ct. 1854, 1861, 48 L.Ed.2d 301 (1976); Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 713 (9th Cir.1992), cert. denied, U.S. _, 113 S.Ct. 1812, 123 L.Ed.2d 444 (1993); Williams v. Curtiss-Wright Corp., 694 F.2d 300, 303 n. 4 (3d Cir.1982). “At a minimum, this burden requires that a party offer some evidence that the [foreign] government acted in its sovereign capacity and some indication of the depth and nature of the government’s interest.” Liu v. Republic of China, 892 F.2d 1419, 1432 (9th Cir.1989), cert. dismissed, 497 U.S. 1058, 111 S.Ct. 27, 111 L.Ed.2d 840 (1990), quoted in Siderman, 965 F.2d at 32a Appendix B 713. Furthermore, cognizant of the rationale supporting the doctrine, a court also must analyze on a case-by-case fashion “the extent to which in the context of a particular dispute separation of powers concerns are implicated.” Allied Bank Int'l, 757 F.2d at 521. In other words, the court must determine whether there is evidence of a potential institutional conflict between the judicial and political branches such that a judicial inquiry into the validity of a foreign state’s actions could embarrass the political branches in their conduct of foreign affairs. See Environmental Tectonics Circuit Op., 847 F.2d at 1058. This analysis “must always be tempered by common sense.” Allied Bank Int’l, 757 F.2d at 521 (citations omitted). “ “The less important the implications of an issue are for our foreign relations, the weaker the justification for exclusivity in the political branches.’ ” Jd. (quoting Sabbatino, 376 U.S. at 428, 84 S.Ct. at 940). The insurance companies maintain that Protexa has not met its burden to demonstrate that the act of state doctrine applies here. They contend that Protexa has not proven that the Port Captain’s order even constitutes a Mexican act of state, nor that any government potentially involved in the incident is concerned about having the validity of the order adjudicated in the federal courts.'® The insurance companies point out that the Mexican government, through its Merchant Marine (“Marine Mercante”), is well aware of this litigation for it permitted the Port Captain to come to the United States to testify in the case. Thus, the companies argue that the Mexican government is not concerned with having the validity of the order adjudicated here. Protexa contends, however, that the Port Captain’s order implicated Mexican national interests concerning the safety of its citizens and its oil exploration in the 16. In addition to Mexico and the United States, Panama might have taken an interest in the case, as the HUICHOL was registered there. 33a Appendix B EEZ. As evidence that the incident attracted the attention of the Mexican government, Protexa submits in its reply brief a written opinion of the Port Captain’s superiors, the Marine Mercante, affirming the authority of the Port Captain to issue the order."” Although the depth and nature of Mexico’s interest in this matter are debatable, we will assume without deciding that it has a substantial interest in this case.'* Nevertheless, Protexa has not demonstrated — nor do we find — that this controversy implicates separation of powers concerns of the sort necessary to support invocation of the doctrine. This litigation is between private parties for the sole purpose of resolving an insurance coverage dispute which, in turn, depends upon the construction and application of a single phrase in the policy. We see no reason for believing that a judicial inquiry into the validity of the Port Captain’s order under Mexican law, in order to determine whether Protexa may recover wreck removal costs, would hinder the conduct of foreign relations by the United States government. In any event, Protexa has not offered evidence suggesting that our rejection of the act of state doctrine would have that consequence, nor even a basis for believing that diplomatic difficulties could arise in the aftermath of this case.'9 17. Prior to oral argument, we denied the insurance companies’ motion to strike material concerning the opinion of the Marine Mercante from Protexa’s reply brief and supplemental appendix. 18. Thus, we also decline to address whether the issuance of aremoval order by the Mexican Port Captain “can be, in certain circumstances, a sufficiently formal expression of a government's public interests to trigger application of the doctrine.” Environmental Tectonics Circuit Op., 847 F.2d at 1058. See Remington Rand Corp. v. Business Systems, Inc., 830 F.2d 1260, 1265 (3d Cir. 1987); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1294 (3d Cir. 1979). 19. Protexa at most asserts that a consequence of holding the Port Captain’s (Cont'd) 34a Appendix B We also point out that Protexa’s contention that an issue of Mexican policy is at stake as we are making a determination of the scope of its powers within the EEZ is simply wrong. As will become clear from the section of our opinion dealing with the validity of the order, we are placing no limitations on the scope of Mexican authority in the EEZ. Rather, we only are determining _that the Mexican Congress itself did not establish a legal predicate ~ for the order. Thus, instead of attempting to circumvent Mexican law, we honor that law and apply it. Essentially, Protexa’s invocation of the act of state doctrine would require this court to engage in mere conjecture about the effect that inquiry into the validity of the order might have on relations between the United States and Mexico. However, we stated in Environmental Tectonics that invocation of the doctrine requires proof of “a demonstrable, not a speculative, threat to the conduct of foreign relations by the political branches of the United States government.” 847 F.2d at 1061. Because we believe that no such threat has been demonstrated, and we will not engage in (Cont'd) order invalid would be that future recipients of similar removal orders would chailenge them, thereby exciting Mexico's interest. Yet such a possibility still does not imply that the conduct of foreign relations by the United States government would be hindered as a result. Moreover, additional challenges to removal orders would seem to raise no such threat, since it is perhaps exactly what should have happened in the present case and should so occur in the future. It appears that Protexa could have challenged the order under the Mexican law of “amparo,” the judicial proceeding by which Mexican citizens seek relief from governmental orders. In fact, Protexa’s main legal expert witness at trial was Dr. Ignacio Melo, a noted lawyer and expert in Mexican maritime and amparo law who has been drafting amparos for 37 years and has handled 25-30 wreck removal order cases with 10-15 in the last six years. Protexa Br. at 27-29. Such qualifications alone indicate that challenging such orders is not unusual. 35a Appendix B speculation on this question, we hold that the act of state doctrine is inapplicable here. Hence, we have no need to reach the insurance companies’ argument that the issuance of the order was an extra- territorial exercise of jurisdiction, and thereby outside of the doctrine’s scope.” Furthermore, we believe that the district court was correct when it pointed out that application of the act of state doctrine in this case differs materially from the manner in which it typically is interposed, viz., by defendants as a “shield.” Were we to apply the doctrine to bar judicial inquiry into the validity of the removal order, Protexa automatically would obtain coverage under the insurance policy. Thus, the doctrine would be utilized as a “sword” to prevent the insurance companies from challenging the coverage. There is another factor which works against applying the act of state doctrine. As we have explained above, Protexa chose to bring this action in the United States. While it contends that it had perfectly legitimate reasons for doing so, and we have no reason to question its good faith, the fact is inescapable that it is seeking to obtain an outcome determinative advantage from its forum selection. We reach this conclusion for, as our analysis in the next section demonstrates, the Port Captain’s order was invalid under Mexican law. Yet Protexa seeks through its forum selection to activate the act of state doctrine and preclude inquiry into the validity of that order. If we apply the act of state doctrine, we will encourage plaintiffs seeking to establish rights under invalid 20. To decide this question would seem to decide the very validity of the Port Captain’s order since the Port Captain’ s authority and jurisdiction are relevant to the order’s validity. As such we do not feel it necessary or wise to consider the implications of a situation in which a court in order to determine whether the act of state doctrine should be invoked, necessarily must perform the inquiry that the doctrine would prevent. 36a Appendix B foreign orders and governmental actions to come to this country to bring their cases. We need not create a “fairness exception” to the doctrine, nor focus solely on the insurance companies, however, to recognize that in the circumstances of this case application of the doctrine would disturb the legal regime underlying the insurance contract. After all, the parties contracted for coverage only if the removal was compulsory by law, meaning in response to a valid order.”! Indeed, Protexa acknowledges that prior to the issuance of the policy involved in this case it “had always purchased broad form wreck removal coverage” which provided coverage “whenever removal is deemed necessary by the insured.” Protexa brief at 5. It further acknowledges that it sought that coverage in the policy involved in this case but could not obtain it, as the insurance companies offered the narrower “compulsory by law” coverage on a “take or leave it” basis. Thus, in this case Protexa was well aware of the limitations of its coverage, and if we permit it to invoke the act of state doctrine to preclude an inquiry into the validity of the order, we will be expanding its coverage beyond what it purchased and paid for. As we noted in Protexa Appeal I, it is significant that Protexa and the insurance companies knew of the case law construing the words “compulsory by law.” Therefore, they were presumed to have intended these words to have their proper legal meaning and effect. 954 F.2d at 135-36. Thus, the parties to the insurance policy bargained for the possibility that a court might inquire into the validity of a governmental removal order to determine whether a policy covered a particular wreck removal. 21. Ofcourse, the removal also could be compulsory by law under either of the other two factors we recognized in Protexa Appeal I, but we are not concerned with them in this aspect of our opinion. 37a Appendix B V. VALIDITY OF THE ORDER In Protexa Appeal I we held that the removal of the wreck was “compulsory by law” if directed by a valid order of the Port Captain. 954 F.2d at 141. Inasmuch as we have determined that the act of state doctrine does not apply and the removal was not compulsory by law under the objective balancing test, we must decide whether the removal order was valid. In this section of our opinion we cite to various provisions of Mexican and international law which we have reprinted in English in the appendix to this opinion.” Under Fed.R.Civ.P. 44.1, the determination of foreign law in the federal courts is a question of law to be resolved by reference to any relevant information, including that provided by expert witnesses. Merck & Co., 774 F.2d at 488. Consequently, we exercise plenary review on this question, and are not confined to information available to or considered by the district court.” 22. We have copies of Mexican documents translated into English in somewhat different versions. We are satisfied, however, that the differences in the translations are not material to the issues here. Insofar as they are available, we have used the versions used by the district court in Protexa II. 23. See Mobile Marine Sales, Lt’d v. M/V Prodromas, 776 F.2d 85, 89 (3d Cir.1985). The insurance companies urge us, however, to give at least some deference to the district court’ s determination of foreign law, on the grounds that this case fits a scenario in which scholarly commentary has noted that deference is justified: A more restrictive review of foreign-law determinations than is usually accorded domestic law seems justifiable only when the oral testimony on alien law offered at trial is in conflict and the circumstances justify according (Cont'd) 38a Appendix B We will begin, therefore, by reviewing certain facts relevant to determining the validity of the removal order. Prior to the HUICHOL’s sinking in bad weather, it had been granted permission by the Port Captain of the Port of Carmen to anchor in an otherwise prohibited area within the Pemex oil exploratory zone. Anchorage is prohibited in this area because oil platforms and submerged oil pipelines are located in it. The HUICHOL sank (Cont'd) special weight to the district judge’s ability to evaluate credibility and demeanor. Arthur R. Miller, Federal Rule 44.1 and the “Fact” Ap [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0190%3A1. Public record. Not legal advice.