Fact Pattern for Electronic Technologies Ltd - Assignment Example

Fundamental Issues In advising both parties, there are some important and basic concepts that need to be raised. Both parties need to be aware of the concepts of jurisdiction, admissibility and arbitrability before any meaningful discussions can proceed. There is a need to “distinguish between the two concepts of jurisdiction and admissibility, since it is a matter of considerable concrete importance”1. It is clearly an important element of every international contract. This is because the fundamental scope of the contract and the legal framework that the contract will be referred to is defined within the context of these two concepts. International Law and Public law makes way for the sovereignty and equality of nations and as such the set of rules and scope of a given nations legal system forms a jurisdiction that is used as reference point for issues that occur within it2. Jurisdiction defines the territoriality, nationality, protective principles, passive personality and universality of an international contract3. Thus, the jurisdiction is what determines the authorities that are recognized in a given situation. In the case at hand, there is no forum selection clause. A forum selection clause is “a provision in a contract that fixes in advance the jurisdiction within which any disputes will be arbitrated or litigated”4. In MS Bremen V Zapata Offshore Co5, a Houston based business entered a contract with a German company to fix oil rig in Italy. There was a clause in the contract that stated that any dispute will be resolved according to English Law. The defendants sent the case to a US court but the case was referred to an English law court since the chose forum for dispute resolution was in the UK and not in the United States. From the facts in this case, it appears that the two parties in the contract failed to define the jurisdiction. That is the fundamental cause of all the problems. Arbitrability has to do with “who decides” but there is another question that makes one doubt “who decides who decides?”6. This is a major issue because the jurisdiction is not clearly specified and due to that, there is a difficulty in finding out who is the authoritative figure and which legal system: whether it is the English, American, Chinese or Japanese system remains unclear. Question 1 Advice to the CEOs of ET A) Jurisdiction of Iowa State and Federal Courts to Hear Case and B) The position of other States and other Federal Courts. C) Possibility of any Motion or Application to any court in USA or England to compel a US Federal court to respect the arbitration clause. The issue in this section of the essay is whether or not the Iowa State and Federal Courts in the state can hear the case that has been submitted or not. From the facts at hand, the following events occurred: 1. The CEO of ET seeks to sue the CEO of CW for breach of contract 2. The CEO of ET desires to litigate instead of arbitrate. 3. He has chosen Iowa and he has served the CEO of CW a writ whilst he was flying over Iowa Airspace and a summons for the damages. Rules The main point of contention is the case of personal jurisdiction, which relates to whether a person from another state can be forced to go to another state in the United States where a lawsuit is filed against him. This is very important because it determines the jurisdiction and admissibility of cases in a given court. Hence, it shows whether or not a given court can sit over a given case and which laws can be invoked in the proceedings. In Pennoyer V Neff7, it Neff and Mitchell had an issue over the paperwork to a land in a given state. Neff took Mitchell to court but Mitchell went out of state and was summoned to appear in court, but Mitchell failed to turn up. Meanwhile, Mitchell arranged for Pennoyer, from another state to acquire the land. Neff sued Pennoyer. Neff won but Pennoyer appealed to the US Supreme Court. The Supreme Court had to determine the position of an out-of-state resident in an issue in a given state or not. It was held that if a person has a property located in a given state, that individual is bound by the laws in the state. This therefore means that the jurisdiction of a given state stretches over a given person who lives in a given state or has some substantial contacts or owns a property in a given state. In Millilen V Meyer8, the defendant, Meyer was a resident of Wyoming. When a suit was brought to him, he was away in Colorado. The suit was, however, served to him in personam. The court went ahead with the ruling which was against him and he challenged it. It was held that a person can always be sued in a state of domicile. From the cases above, two things can be established: 1. A person can be sued in a state if s/he is domicile in the state 2. A person can be sued in a given state if he owns a property in that state Minimum Contact Another more critical case, International Shoe Co V Washington9 the concept of minimum contacts was established because it was apparent that lawsuits of this nature were in personam rather than in rem. In other words, such lawsuits went directly against persons responsible for the contract and not the organisation as a whole. In this case, it was held that: 1. Jurisdiction is permissible when defendants activity is a continuous and systematic course of action. 2. Sporadic or casual activity that the defendant in the forum state does not justify assertion of jurisdiction on a course of action unrelated. 3. Where general jurisdiction is unrelated but reasonable, action can be taken against the defendant in the state in question. 4. Where the cause of action arises as a result of an action or activity of a specific jurisdiction. Further cases developed the concept further. In Helicopteros Nationales De Colombia SA V Hall10, the distinction between general and specific indicated that there should be substantial related activities for a case to be considered in a given state. On the other hand, the concept of minimum contact was developed to indicate that a defendant must have a purposeful affiliation with the forum state before the state can have jurisdiction over the case filed11. Long Arm Statutes Additionally, the long arm statues indicate that when a defendant is in the presence of a state, the defendant could take action in that state based on that states laws. However, this cannot violate the 14th Amendment of the US Constitution. Diversity of Citizenship and Admission to Federal Courts In terms of the Federal courts, the principle of Diversity of Citizenship applies. Parties from two or more different states or in a case where one person is from outside the United States, this doctrine could be invoked. Also, in a case where the amount in question is greater than US$75,000 the case can be subjected to the Diversity of Citizenship doctrine. The doctrine will mean that the case can be sent to a US Federal District Court. Applicable Laws In the US, each state can apply its own contract laws to interpret the matter except where the contract was incorporated in another state and that state law must be applied12. In other cases, the principles of international contract, under Contracts on International Sales of Goods (CISG) could be applied13. In the Federal Law there is some complication on what law applies in each situation. In an 1842 ruling, it was held that the Supreme Court can use any law that suits it to interpret a case that has elements of diversity14. However, the Erie Doctrine sought to cancel this provision. The Federal court was required to apply the substantive law of the state they sit in. Since there is no Federal Common Law, the Common Law of the state within which a case is filed is invoked. In Hanna V Plumer15, it was held that where the Federal court had a ruling on the subject, that ruling should be used. Where there is no such ruling, the common law of the State used [Erie Rule] should be invoked. Arbitrability The Federal Arbitration Act (1925), which is 9 USC Section 1 facilitates private dispute resolutions through arbitration. The FAA applies both to federal and state courts and compels people to go for arbitration if some important facts are met in the case. This is confirmed in Shariff V Wellness International Network Ltd16 where it was held that “the Federal Arbitration Act however states that if the parties have an arbitration agreement and the asserted claims are within their scope, the motion to compel cannot be denied.” The main conditions in this are as follows: 1. Existence of disputes between the parties 2. A written agreement that includes arbitration provisions which purports to cover disputes 3. The relationship of the transaction which is evidenced by the agreement to interstate or foreign commerce. 4. The failure, neglect or refusal of the defendant to arbitrate the dispute17 Application of Rules A. Appropriateness for Suing In Iowa From the pointers above, the CEO of CW was flying over Iowa airspace. This made him physically present in Iowa. Summonses are also issued in personam. And since this is directed at the CEO of CW directly, the will be applicable to the CEO once he received it in Iowa airspace. This is because he had a physical presence in the state and there is a reason why he can be sued under state law. This is based on the long-arm statute which seems to implicate everyone who is within a state. Once summons are issued, the state court must be respected. Basing the summons on the fact that Yonkers sells CW products is too remote. This is because they are third party sellers of CW products and cannot be held liable. In an Iowa state court, Iowa State is the default law that needs to be applied. However, since this contract was an international contract without any specific state of incorporation, it will be more appropriate to invoke the Contracts under International Sales of Goods (CISG). This will provide an international code that can be used universally on the case at hand. A federal court in Iowa can have the same effect once the CEO of CW is served a summons over Iowa airspace. This is because the Diversity of Citizenship principle makes it possible for cases worth over $75,000 with one of the party being a non-American to apply to a federal court. Since the issue is worth $3 million and the managers of ET are British, they can go to a federal court on this account. In the federal court, the court will use an old ruling on this case if there is one. If there is none, the court can use the Iowa common law provided it is reasonable and does not cause injustice to any of the parties. B. Appropriateness of Suing in other States and other States federal courts. The CEO of ET can still sue in other states. According to the Millilen V Meyer principle, they can sue either in California, which is the place of domicile of the CEO of CW. Also, they can sue in Delaware, since it is the place of incorporation. In either case, state law is the default law but since this is a vague contract, the Contracts under International Sales of Goods laws will need to be invoked. This is because the contract did not get specific in any of the cases. Also, federal courts in both states can be approached and a case can be successfully filed in either states. In each case, the federal rulings that exist will be invoked. If none exists, there will be the need to invoke state common laws. C. Motion for Arbitration The CEO of ET can file a motion in a US federal district court under Federal Arbitration Act, 1925. He will need to prove that there is a dispute. This can be done by showing the clause which stated that the case will be sent for arbitration and also indicate that there is a disagreement on a certain grounds. There should also be proof that the defendant does not want to arbitrate. Once this is done, they can get an injunction to get the CEO of CW to cooperate and begin an arbitration process. Question 2 Advice to the CEO of CW The CEO of CW has cancelled the contract because on second examination, he identified that the products are not of the quality he wants. In line with this, he wants to also sue for damages. In this section, we examine three important things: 1. Whether there is a valid arbitration clause in the international sales contract and whether the arbitration will be institutional or ad hoc. 2. Whether or not a procedural law for the seat of the arbitration and the substantive law of the international sales contract can be determined so that the arbitrator may apply them and 3. In case the Iowa state and Federal courts have personal jurisdiction over CW and gains a jurisdiction over he dispute, is there any motion or application that can be made in respect to the courts jurisdiction over the case Rules Arbitration is a form of alternative dispute resolution. It is a non-adversarial form of dispute resolution. Institutional arbitration is one which uses specialized institutions which intervenes, like the London Chamber of International Arbitration, International Chamber of Commerce amongst others. In institutional arbitration, an institution is designated or nominated mutually by the parties and they arbitrate based on pre-established procedures and systems. In these arrangements, there is a list of arbitrators to choose from and there is administrative assistance from the authorities based on an established format18. Ad hoc arbitration on the other hand involves a situation where the parties agree to a special forum without referring to a special group. The Parties devise and agree on a bespoke arbitral process. Where it cannot be done, the United Nations Commission on International Trade Law (UNICITRAL) is invoked19. Proceedings are independent of institutions and the parties choose the tribunal to be used. There is no review of award by an arbitrational institution. Procedure In terms of procedure, the tribunal will decide which procedure to use to resolve the matter. This is done through a written submission by both parties. The two parties will have to agree between the distinctive common law and civil law jurisdictions which will be used as the background for the admissibility of evidence. This will be done according to the International Bar Association 1999 edition of the Rules on Taking Evidence which stipulations that define the scope on: 1. Sufficiency of evidence 2. Legal scopes and limitations 3. Burden of proof 4. Criteria for determining loss or destruction of documents. 5. Commercial or technical issues relating to confidentiality. 6. Linkages with other institutions 7. Fairness and equality issues Most of the other rules of the UNICTRAL framework will apply to this case. Hearings will be done like trials and this will be similar to civil proceedings. There will be a president appointed to head the panel and the hearings will be done under his control and supervision Motion Voluntary arbitration can be invoked if it was disclosed in the contract20. The parties must attest to use arbitration for the dispute and most US federal courts of appeal hold that where the parties voluntarily agree to resolve the dispute in arbitration, a US district court possesses the authority to grant an interim injunction relief in aid of arbitration21. Advice to Clients A. Arbitration The arbitration that will take place is likely to be ad hoc rather than institutional. This is because no institution was mentioned in the contract. The parties will have to follow what they stated in relation to the lawyer they nominated, Lawyer Oman. In doing this, the parties will have to begin negotiations on how to proceed with the arbitration based on the United Nations Commission on International Trade. This will be get the parties to come to a consensus on how to resolve the matter through alternative dispute resolution and not through litigation. B. Procedure for Arbitration The arbitration will be put together based on the UN Commission on Trade Law (UNCITRAL). The UNCITRAL will enable the two parties to come to a consensus based in the International Bar Association procedures. This will involve conclusions on evidence, scope, limitations, linkages with institutions and other relevant factors. However, the International Bar Association procedures will become the framework for the discussions. When they settle on procedures, they can come up with an appropriate timetable and Lawyer Oman can be appointed as the president to handle the case. C. Motion Assuming there was no clause to arbitrate, the two parties could have come up with a voluntary arbitration agreement. This would have been done by one party applying to a US district court for an injunction and the halting of any litigation that has began in a federal or state court. Both parties must however agree in order for the motion to stand. Bibliography Books Brownlie, I Principles of Public International Law (Clarendon, Oxford 5 Edn, 1998) Perkel, Warren. Principles of International Law (Amsterdam: Kluwer Law 2 Edn, 2009) Profaizer J and Prince D. “US: Injunctions in Aid of International Arbitration in Federal Courts” Global Arbitration Review 25th July 2012 Savage, D. Ad Hoc V Institutional Arbitration (London: Charles Russell 2010) Schaefer Richard, Agusti Filiberto, Earle Beverly. International Business Law and its Environment (Mason, OH 2 Edn: Cengage, 2009) Journals Paulson, Jan. “Jurisdiction and Admissibility” General Reflections on International Law, Commerce and Dispute Resolution (Publication 693, 2005) Williams Park. “Arbitrational Jurisdiction in the United States: Who Decides What” INT ALR Issue 1 (2008) Cases Am Gen. Life Insurance V Wood 429 F 3d 83 87 C 4th Cir 2005 Hanna V Plumer 380 US 460 85 S Ct 1965 Hanson V Denckla 357 US 235 78 S Ct 1958 Helicopteros Nationales De Colombia SA V Hall 466 US 408 1984 International Shoe Co V Washington 326 US 310, 66 S. Ct. 154, 90 LED (1945) Millilen V Meyer 311 US 457 61 1945 MS Bremen V Zapata Offshore Co 407 US 1 1972 Pennoyer V Neff 95 US 714 1877 Shariff V Wellness International Network Ltd 376 F39 720 726 2004 Swift V Tyson 41 US IED 1842 Statutes Federal Arbitration Act (1925) Read More