80 Chi.-Kent L. Rev. 119
Chicago-Kent Law Review
2005
Symposium: Final Status for Kosovo: Untying the Gordian Knot
Article
*119 RESOLVING CLAIMS WHEN COUNTRIES DISINTEGRATE: THE CHALLENGE OF KOSOVO
Copyright © 2005 Chicago-Kent College of Law; Henry H.
Perritt, Jr.
Introduction
Final status for Kosovo [FN1] must be
accompanied by mechanisms for resolving claims by and against Kosovo and
persons operating within its territory. When states break up, as in the cases
of the Soviet Union, Yugoslavia, and East Timor, the international legal,
political, and economic systems must deal with conflicting claims by and
against the elements of the preexisting state. [FN2] Who is entitled to
a bank account maintained by the former state
of Yugoslavia in New York: Serbia-Montenegro? Croatia? Slovenia? Who is
responsible for a debt of a socially-owned enterprise ("SOE") located
in Kosovo? Serbia-Montenegro? The purchaser of the assets of the SOE in a
privatization sale? The privatization agency? Are the debts of the former
Yugoslavia to be allocated in the same way as claims on its assets?
Some but not all of the same issues arise
when the former government of a state is displaced by revolution or by the
international community, as in Afghanistan or Iraq. [FN3] Is the new
government responsible for all the debts of the old regime? Are elements of the
old regime or nominally private persons or entities enjoying franchises under
the old regime entitled to *120 some of the assets, on the grounds that
they were personal and not governmental in character? [FN4] Public international law provides only scant guidance for
resolving these questions.
Part I of this Article discusses the
categories of claims, the dispute resolution mechanisms, and the private
international law concepts developed in other contexts that may be useful in
deciding the final status of Kosovo. Part II addresses the legal concepts,
tools, and frameworks available that may provide insight for resolving claims
in Kosovo. In Part III, this Article surveys frameworks used in other
situations with features similar to those present in Kosovo. Part IV discusses
the need for any claims resolution system to have the power to extinguish
preexising rights. Part V describes the unique situation
in Kosovo, including problems with claims dispute mechanisms already in place
and common criticisms of the procedures currently being followed. Part VI then
offers several scenarios that might reduce the potential of claims disputes to
block successful negotiations over final status for Kosovo. In order to frame
the claims resolution issues, the Article assumes an independent Kosovo. Final
status other than independence, such as defining an autonomous Kosovo within
the Union of Serbia and Montenegro or within a separate state of Serbia,
presents fewer claims resolution challenges because an overarching legal system
would already exist within which claims could be resolved.
I. Universe of Claims, Dispute Resolution
Machinery, and Private International
Law Rules
Any policy analysis of claims affecting the
future status of Kosovo involves three overlapping tasks: categorizing claims,
identifying institutional mechanisms for resolving disputes over claims, and
crystallizing questions of private international law (conflict of laws) to know
what sources of substantive law, what tribunals, and what enforcement
mechanisms are available to decide claims disputes.
A. Categories of Claims
Claims relating to Kosovo fall into two broad
categories: intergovernmental claims and
private claims. Intergovernmental claims include *121 claims by the state
of Serbia, a possible new state of Kosovo, and third states to physical assets
and to intangibles (such as currency and gold reserves), regardless of where
they are located. Intergovernmental claims also include claims by international
organizations such as the World Bank for repayment of loans.
A useful analytical framework for evaluating
mechanisms for claims resolution must accommodate differences along two
dimensions: a sovereignty dimension and a public-private dimension. The first
dimension involves disputes over where sovereignty resides. In some cases, such
as Cuba in 1958, or Afghanistan or Iraq in 2002-2004, state boundaries remain
intact, but one government is supplanted by another, which seeks to exercise
sovereign power in a way that affects ownership or other claims to property. In
other cases, such as the breakup of the Soviet Union, a preexisting state
dissolves, but a part of the territory enjoys the status of "surviving
state." In the most difficult case, a preexisting state, such as Yugoslavia,
dissolves, and there is no entity entitled to the status of surviving state.
The second dimension concerns the
characterization of an entity obligated on a claim or asserting rights to
assets. In some cases, a creditor or debtor may unambiguously be a state. At
the opposite pole, a creditor or debtor may unambiguously be a private
person--natural or legal, such as a corporation. A number of intermediate possibilities exist, such
as nationalized enterprises, SOEs in the former Yugoslavia, and enterprises
formerly owned by the state but that had been privatized in whole or in part.
Private claims fall into three overlapping
categories: claims by natural persons to real property; employment-related
claims, as for unpaid wages, termination pay, or pension benefits; and
commercial claims, as by owners of equity interests in enterprises or claims by
creditors of enterprises. In some cases, the alleged obligor on private claims
is a state or quasi-public entity. In other cases, the alleged obligor is
another private person, natural or juridical.
Mechanisms for claims dispute resolution must
encompass all of the relevant permutations:
1. a state asset holder's relations with a
state claimant,
2. a state asset holder's relations with a
private claimant,
3. a private asset holder's relations with a
state claimant, and
4. a private asset holder's relations with a
private claimant in conditions in which the power to change legal relations is
clouded by changes in sovereignty. *122 Most of the literature on state
succession focuses on the first permutation, and, indeed public international
law concerns itself with only that permutation. The fourth permutation has
often been ignored, presumably on the basis that it involves private law only,
and is a matter for national courts. But in
the case of Kosovo, all four permutations must be addressed.
B. Dispute Resolution Mechanisms
Most scholarly attention to successorship has
focused on the resolution of intergovernmental claims because there is no
permanent, comprehensive mechanism for resolving such claims in the
international public law system. Conversely, a variety of legal systems already
exist for resolving private claims, including the national legal systems of the
surviving states, the national legal systems of third states in which assets
may be located or where creditors may be citizens, and international private
arbitration under the New York Convention. [FN5]
In the case of Kosovo, policymakers and lawyers
should focus attention on mechanisms for resolving disputes over private claims
as well as intergovernmental claims. Presumably, whatever final status is
determined for Kosovo, both Kosovar and Serbian claimants could file claims in
the domestic courts of Kosovo, the domestic courts of Serbia, or the domestic
courts of third states. This approach is unlikely to be acceptable, however,
because of likely mistrust by Kosovars of the domestic courts in Serbia [FN6] and mistrust by
Serbs of the domestic courts in Kosovo. Whether the domestic courts of third
countries are perceived as fair depends substantially on what substantive law they apply, an issue that
implicates questions of private international law considered in the next
section.
Likely mistrust of the neutrality of
conventional judicial institutions for claim resolution suggests consideration
of specialized claims resolution tribunals accompanied by procedures and
personnel appointment processes that assure neutrality. Following sections of
this Article consider various models that should be considered.
*123 C. Private International Law
Any mechanisms for resolving private claims
disputes must address the three traditional subjects encompassed by private international
law: choice of substantive law to be applied to a case; adjudicative
jurisdiction (the power of a particular tribunal over the parties to a
particular dispute); [FN7] and enforcement of tribunal decisions, especially
enforcement by the courts of states in which assets belonging to a judgment
debtor may be located.
Choice of law is a complex and--in the United
States, at least--substantially indeterminate legal regime. Nevertheless, some
basic rules of thumb, common to most choice of law regimes, are helpful in
designing claims dispute resolution systems. First, in a dispute over real
property, the law of the place where the property is located usually is
applied. [FN8] Second, in
employment disputes, the law of the place where the workplace is located
usually is applied. [FN9] Third, in contract disputes, explicit choice of law
provisions in the contract usually are enforced. [FN10] In the absence of such choice of law provisions,
adjudicative forums usually apply either the law of the place of performance of
the contract or the law of the place where the contract was made. [FN11]
Uncertainties with respect to adjudicative
jurisdiction can be reduced by ensuring that any tribunals intended to be
available for resolution of claims related to Kosovo are fair and fully
accessible to claimants, and that their organic statutes or regulations give
them exclusive jurisdiction over such claims. Such features increase the
likelihood that the doctrine of forum non conveniens, discussed in Part
VI(A)(11), will steer claims to the preferred tribunals, and that the doctrine
of lis pendens will give priority to the preferred tribunals if claims are
filed there first.
The same features that reduce uncertainty
with respect to adjudicative jurisdiction will increase the likelihood that
decisions by the preferred tribunals *124 will be effectively enforced
by courts in places where judgment-debtor assets are located.
Nevertheless, residual uncertainty is
inescapable because the source of private international law for any specific
case is the law of the forum. [FN12] An external sovereign, in the absence of a treaty
mechanism, cannot determine absolutely what choice of law, adjudicative
jurisdiction, or judgment enforcement rules
will be applied by a court in another legal system. [FN13]
II. Legal Concepts, Tools and Frameworks
A. Elemental Concepts
Claims incident to the dissolution of a state
are similar to those arising in the context of other legal relationships, but
the conflict of laws problems are more serious when states are involved. When
the dissolving state is solvent at the time of dissolution, the situation
resembles probate of a will, severance and partition of a joint tenancy, or a
corporate division such as a spin-off. [FN14] When a will is probated, claimants may be sad that the
decedent no longer exists, but their wealth may increase. The challenge for the
legal system involves marshalling of assets, valuation, notifying debtors, and
distribution according to rules set by the will. Distribution is shaped by the
requirements of one legal system for the interpretation of the will and for
forced shares of certain privileged descendants. In the severance of a joint
tenancy and partition of the resulting tenancy in common, [FN15] claimant assets are not increased, but they are not
diminished either. Equitable distribution *125 is the standard, but most
cases involve the comparatively simple reality that land is located in only one
state, whose local law is applied to the partition. [FN16]
When the dissolving state is insolvent, not all the claimants can be
satisfied, and the problem resembles bankruptcy or equity receivership, [FN17] with the added
complexity that multiple legal systems are involved. In a bankruptcy, assets
are insufficient to satisfy all claims, and there often are multiple,
conflicting claims to the same assets. Once the bankruptcy is complete,
claimants have fewer assets than they did before the bankruptcy. [FN18]
Any model for apportionment of claims and
assets must include a mechanism for resolving disputes over valuation [FN19] and distribution.
B. Legal Frameworks for State Succession
Public international law provides only scant
guidance for resolving claims when states break up. Until 1989, when the Soviet
Union broke up, the customary international law doctrine of state succession
focused mainly on treaty continuity and membership in international
organizations, and not much on succession to debts and assets. [FN20] Among other
things, this was due to the fact that most instances of state succession until
1989 involved decolonization where most of the assets and debts were clearly
under the control of the colonial power. [FN21] Natural
resources located in the former colonies did present issues, however.
*126 In discussions in the U.N.
General Assembly beginning in 1981, former colonies
asserted indefeasible claims to their natural resources. The International Law
Commission drafted some preparatory documents, and a diplomatic conference
authorized by the General Assembly produced the Vienna Convention on Succession
of States in Respect of State Property, Archives and Debts in 1983 ("1983
Vienna Convention"). [FN22] The 1983 Vienna Convention, which has not entered into
effect because it has not obtained the requisite fifteen ratifications, failed
to resolve many important questions arising in the dissolution of states, as in
the cases of the Soviet Union, Yugoslavia, [FN23] and East Timor.
For example, the treaty failed to distinguish between territorial and national
assets. [FN24] It did not require any proportionality between assumption
of claims and assets. [FN25] It did not
provide for any ongoing dispute resolution machinery. In the main, it provided
for claims to be resolved by international agreement and provided only a
general framework of default rules.
Customary international law with respect to
state succession distinguishes between continuation and dissolution:
In the case of continuation, one or more
sub-state entities breaks away from the predecessor state and forms an
independent state. What remains of the predecessor state is referred to as the
continuing state . . . and is deemed to continue the international legal
personality of the predecessor states. The break-away states are referred to as
successor states or newly independent
states.
In the case of dissolution, the predecessor
state dissolves into a number of independent states, with none of these states
considered the continuing state. All of the emerging states are considered
successor states and are treated as equal heirs to the rights and obligations
of the predecessor state. [FN26]
The 1983 Vienna Convention did not
distinguish between continuation and dissolution, although it did distinguish
between newly independent *127 states, separation of part or parts of
the territory of a state, and dissolution of a state. [FN27] Under customary
international law, the continuation case left the assets with the continuing
state, a practice derived from decolonization, where the national property did
not come within the sovereignty of the successor state. [FN28]
But in the case of dissolution, the
predecessor state, having lost its international legal personality, is no
longer competent to own property [FN29] and, thus, state property must devolve to successor
states. [FN30] But the legal position of successor states depended on
whether they were recognized as states. [FN31]
Because the 1983 Vienna Convention has not
entered into effect, customary international law, informed by commentary
arising from negotiation of the 1983 Vienna Convention, provides the principal
legal framework for resolving state succession
issues involving debts and assets. But this legal environment also is
indeterminate and incomplete, primarily because public international law
focuses only on the relationships among states. [FN32] The 1983 Vienna
Convention defined state property as "property, rights and interests . . .
owned by that state." [FN33] State debts are
defined as "any financial obligation . . . towards another State, an
international organization or any other subject of international law." [FN34]
The treaty framework contemplated by the 1983
Vienna Convention also is incomplete in that it fails to implement a freeze or
standstill to preserve assets. [FN35]
Williams and Harris draw the following
principles from state practice after the end of the Cold War: first, a
distinction should be drawn between *128 national and territorial debts;
[FN36] second, the
principle of pacta sunt servanda should govern debt obligations; [FN37] third, the proportion of territorial debt can be used as a
basis for allocating national debt; [FN38] and finally,
population and economic indicators can determine the share of national debt. [FN39]
Whatever guidance the 1983 Vienna Convention
or customary international law may give for adjusting debts owed by dissolving
states to other states and for allocating assets held by other states among the
components of dissolving states, neither offers theoretical guidance for claims
by private persons against dissolving states
and assets owned by dissolving states but held by private entities. Those
private sector issues are rather the province of informal arrangements in the
financial community, such as the Paris Club [FN40] and the London Club, [FN41] or by
specialized mechanisms established by bilateral agreement, such as the
Iran-U.S. Claims Tribunal. [FN42]
C. Legal Frameworks for Private Claims
Legal regimes for resolving private claims
associated with dissolution of states are fragmentary and incomplete. This is
due, in part, to the traditional limitation of customary international law to
relations among states, and to the conventional belief that private claims can
be resolved by national legal systems of the debtor or creditor states
according to private international law principles for adjudicative
jurisdiction, judgment recognition and enforcement, and choice of law. [FN43]
Private claim resolution has been addressed
in international law in the context of transnational investment disputes,
including expropriation and privatization, and in bilateral U.S. treaties
providing for comprehensive claims dispute resolution in the cases of Russia,
Korea, Vietnam, and Iran. Privatization can have a significant impact on the
resolution of claims in the state succession context. The Yugoslav experience,
where Serbia refused*129 to
participate in various EU mechanisms for resolving claims involving the former
Yugoslavia, [FN44] in part because
it wanted to include assets held by SOEs in Yugoslavia, [FN45] is an example. [FN46] The breakup of
Czechoslovakia provides another example, where disagreements between the Czech
Republic and Slovakia were driven in large part by the differential impact of
privatization. [FN47]
One of the few comprehensive mechanisms for
private claims is the International Center for the Settlement of Investment
Disputes ("ICSID"), established under the Convention on the
Settlement of Investment Disputes between States and Nationals of Other States
("Settlement Convention"), which came into force on October 14, 1966.
[FN48] Among other
things, it provides standing machinery for conciliation and arbitration of
investment disputes between nationals of signatory states and other signatory
states. [FN49]
One hypothesis of this Article is that
private debts and claims should follow the same norms as those for public debts
and claims, unless there is a clear private agreement to the contrary, such as
one containing explicit guarantees by states.
The absence of comprehensive international
law models for the resolution of private claims associated with dissolution of
states requires reference to features of several overlapping international and
national law regimes: nationalization, privatization, and bankruptcy.
The most general legal regime for resolving
private claims that cross state boundaries is the regime for breach of
contract. Even when unresolved controversies exist over apportioning state
assets and responsibility for state debts in cases of state succession, private
creditors and debtors *130 remain subject to preexisting private
contractual obligations. Claims for breach of those obligations lie in national
courts.
Breach of contract actions traditionally were
not available against states and their instrumentalities, [FN50] so the private
contract regime may be unavailing when a predecessor or successor state is the
obligor on a contract obligation. [FN51] Moreover, breach
of contract liability may not provide a private creditor with meaningful relief
when the debtor--public or private--is insolvent. [FN52]
2. Sovereign Immunity
Sovereign immunity is implied by an
international legal system of coequal sovereigns. [FN53] As U.S. law
evolved, however, it extended sovereign immunity more broadly than the law of
many foreign jurisdictions. [FN54] Moreover, the
extension of state activities into the commercial sphere spawned calls for
revision of sovereign immunity doctrine under U.S. law. [FN55] In 1952, the U.S. State Department adopted a
"restrictive" interpretation of sovereign immunity, which extended
immunity to governmental acts, but not to commercial
ones, albeit undertaken by entities nominally governmental. [FN56] The restrictive theory is regularly applied by foreign
courts in suits against instrumentalities of the U.S. [FN57]
In 1976, Congress enacted the Foreign
Sovereign Immunities Act ("FSIA"), codifying the restrictive
interpretation of sovereign immunity. [FN58] The FSIA contains a "commercial activities"
exception to sovereign immunity, which subjects foreign entities to suit in
U.S. courts over their commercial*131 activities. [FN59] Uncertainty with respect to the commercial activities
exception to sovereign immunity is particularly troublesome in connection with
suits by private parties against central banks, which often guarantee private
commercial transactions. [FN60]
3. Bankruptcy
Bankruptcy is the traditional method for
resolving private claims when the debtor lacks sufficient assets fully to
satisfy all creditors, but significant limitations vitiate its utility in the
context of final status determination for Kosovo.
Bankruptcy is a statutory procedure, usually
triggered by insolvency, [FN61] in which a
(usually private) debtor is reorganized or liquidated by a judicial body for
the benefit of the debtor's creditors. [FN62] Under U.S. law,
there are two basic forms of bankruptcy: reorganization and liquidation. In a
reorganization, the debtor continues as a going concern, and its future earnings are structured to satisfy part or all
of its debts. [FN63] In a
liquidation, the debtor's assets are sold off, with the proceeds used to
satisfy its debts. [FN64]
The bankruptcy laws of other countries vary
widely. French bankruptcy law was extensively reformed in 1984, 1985, and 1994,
with goals of saving enterprises, preserving jobs, and paying creditors. [FN65] Bankruptcy
proceedings occur before panels of the Commerce Tribunal, comprising lay
businesspeople elected by local chambers of commerce. [FN66] Creditor control of the debtor estate is minimized [FN67] and the court itself decides whether *132
reorganization is possible or whether liquidation is necessary. [FN68] In contrast, virtually all reorganizations in Germany
occur out of court, a result of inadequate reorganization procedures under
German bankruptcy law. [FN69]
In 1995, the member states of the European
Union adopted the Convention on Insolvency Proceedings ("Insolvency
Convention"), which integrates European bankruptcy law. [FN70] The Insolvency
Convention applies to insolvencies of individual and corporate debtors, but
excludes banks and insurance companies. [FN71] It provides for
an automatic stay and for the appointment of a trustee. [FN72] The decisions resulting from an insolvency proceeding in
one member state must be recognized and enforced by courts in all member
states, subject to choice of law rules contained in the Insolvency Convention
and to the possibility of ancillary
proceedings. [FN73] It does not, however, address the effect to be given bankruptcy
court decisions from states outside the EU. [FN74]
The United Nations Commission on
International Trade Law ("UNCITRAL") has formulated a legislative
guide on insolvency law, [FN75] seeking to strengthen and harmonize national bankruptcy
law. [FN76] The guide distinguishes between liquidation and
reorganization, making recommendations for effective national law regimes,
while noting the socio-political interests that may thwart complete
harmonization. [FN77] Among other
things, it recommends subjecting SOEs to bankruptcy provisions applicable to
purely private enterprises. [FN78]
A bankruptcy system, whether international or
purely local, is infeasible unless the legal system within the territory where
assets are located has an effective creditors' rights regime. A declaration by
a bankruptcy tribunal *133 that a creditor is entitled to particular
assets is worthless unless the creditor has a way to compel the legal
authorities to force those in possession of the assets to give them up. Thus,
if the assets involved in a bankruptcy are located in a territory where the
authorities do not recognize the legal authority of the bankruptcy apparatus,
or in which there is no effective commercial rule of law, those assets are not
a meaningful part of the bankrupt estate. [FN79]
A
number of commentators have proposed a "universalist" approach, in
which states would recognize the decisions of the bankruptcy courts of the
state of incorporation of multinational corporations. [FN80] Other
commentators insist that the most that can be hoped for is a greater measure of
cooperation among national courts, considering parallel bankruptcy proceedings
for the same corporate entity. [FN81] Chapter III of
the UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment
provides for national court recognition of decisions by bankruptcy courts of
other jurisdictions, subject to important exceptions. [FN82]
4. Nationalization, Expropriation, and
Eminent Domain
International law does not distinguish
meaningfully among nationalization, expropriation, and eminent domain. [FN83] All three terms
refer to the exercise of legal power by a state to transfer the ownership of
private property into state hands. Whenever such power is exercised, the former
owners of the property are likely to have difficulty realizing their claims
through litigation in national courts of other states. The biggest barriers are
sovereign immunity and the act of state doctrine.
*134 In Banco Nacional de Cuba v.
Sabbatino, the U.S. Supreme Court held that the validity of an expropriation
decree by the Cuban government could not be questioned in a U.S. court because
of the act of state doctrine. [FN84] The controversy arose from facts typical of
nationalization or expropriation. A commodity
broker purchased sugar from a private enterprise operating in Cuba. After the
sugar was loaded, but before it was shipped, the government of Cuba
nationalized the enterprise. Both the former owners of the nationalized
enterprise and the Cuban government claimed the proceeds, and the Cuban
government sued in U.S. federal court. [FN85] The district
court found the expropriation decree invalid because it violated international
law, and the court of appeals affirmed. [FN86]
The Supreme Court reversed. [FN87] First, even
though the U.S. had not recognized the Cuban Government, the Court held that
the government of Cuba could sue in U.S. federal court. [FN88] Second, the Court held that the act of state doctrine
foreclosed judicial invalidation of the Cuban law on which the Cuban
Government's claim was based. [FN89] The Court
characterized the act of state doctrine as having arisen in England in 1674 and
having been transplanted to the U.S. in the late eighteenth and early-nineteenth
centuries. [FN90] The Court expressed the doctrine as follows:
Every 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 another, done within
its own territory. Redress of grievances by reason of such acts must be
obtained through the means open to be availed of by sovereign powers as between
themselves. [FN91]
If the posture of the case had been somewhat
different, the Court said, the act of state
doctrine could have been interposed successfully as a defense to a claim by the
former owner of the enterprise for the proceeds. [FN92]
The act of state doctrine thus is a powerful
barrier to litigation of private claims in national courts when the outcome of
the litigation is determined by an expropriation or nationalization law.
The international community has sought to develop
international legal frameworks, accompanied by dispute resolution machinery, to
fill the gap, *135 but working out a multilateral framework for
encouraging and protecting private investment in developing countries has
proven difficult. [FN93]
In the late 1990s, members of the
Organization for Economic Cooperation and Development ("OECD") sought
unsuccessfully to negotiate a Multilateral Agreement on Investment
("MAI"), working with the World Bank through its International Center
for the Settlement of Investment Disputes ("ICSID"). The MAI
negotiations were scheduled to be completed by April 1998, but that deadline
has long passed, and most observers consider the initiative to be dead. [FN94]
The MAI was to have defined rights for
private sector investors and to have included a procedure for seeking recourse
against host governments in investment disputes. The MAI's scope would have
included more than outright nationalization or expropriation; it would have
extended to excessive or discriminatory taxation or regulation. The proposed
MAI included the following key components:
1. Nondiscrimination: guaranteeing that
"host states" (i.e., states where the investment is taking place)
grant foreign investors equal or comparable rights to host state (national)
investors;
2. Restrictions on certain performance
requirements: this would prohibit states from imposing special targets or other
conditionalities on the activities of investors
3. Transparency: ensuring that
investment-related laws, guidelines, and procedures are publicly available to
ensure predictability;
4. Funds transfer guidelines: ensuring that
host states will not restrict certain investment-related financial transactions,
such as the transfer of profits back to an investor's home country;
5. Tight controls on expropriation: setting
international limits and laws governing expropriation and subsequent
compensation; and
6. Dispute resolution: establishing binding
arbitration procedures to settle investment-related disputes between states and
investors and between host and home states. [FN95] *136 Absent such a treaty framework, disputes over
alleged discriminatory treatment of investors or expropriation of investments
must be resolved in national judicial systems of the host country, or of the
investor's country, or through various third-party arbitration and conciliation
mechanisms.
Despite the failure of the MAI, bilateral investment-protection treaties
fill the gap. [FN96]
Federal statutes in the U.S. contemplate suspension of foreign assistance to
states that expropriate the property of U.S. investors. [FN97] Chapter 11 of the North America Free Trade Agreement
("NAFTA") is the only instance so far in which private investors have
been given direct access to dispute resolution mechanisms that are binding
against states. [FN98]
5. Privatization
Privatization superficially appears to be the
converse of nationalization. In privatization, property formerly owned by the
state is transferred to private owners. But this formulation is misleading.
State-owned property subject to privatization usually is held subject to
private claims arising from loans or other commercial claims by suppliers of
equipment or raw material. Privatization of such property often involves
application of governmental power to extinguish or otherwise to limit such
claims. Moreover, the property subject to privatization often was the subject
of an earlier nationalization. Some commentators frame the legal issues
involved in privatization as relating to a "nationalization-privatization
cycle." [FN99]
Privatization thus presents special problems
in the state succession context. By definition, it results in the transfer of
property interests from *137 the state to private owners. But to
encourage private investment, the privatization process often strips
liabilities from the privatized assets and requires
that these claims be satisfied by recourse to a special privatization fund,
accumulated from a combination of public funding and payments by investors in
the assets. [FN100]
When the legal personality of the state changes, the new state may seek to
repudiate those transfers. Or, in many cases, preprivatization creditors of the
privatized enterprises may assert liability against the new owners.
In more complicated cases, such as Kosovo,
enterprises were already privatized or transformed into private ownership, then
renationalized by the political trustee, and finally privatized through a
process deriving its legal power from an ambiguous legal mandate to the
trustee. Some claimants argue that the first privatization process was invalid.
Other claimaints argue that the first privatization process was valid and the
second invalid.
Such privatization disputes frequently result
in litigation in the courts of third states. When that occurs, courts presented
with the disputes must decide whether to exercise judicial power over them.
U.S. courts generally have uniformly viewed the activities of privatization
agencies as falling within the judicial immunity conferred by the U.S. Foreign
Sovereign Immunities Act, although case authority is mixed on whether such
activities nevertheless present justiciable controversies under the commercial
activities exception of the Act. In Sablic v. Croatia Line, the New Jersey
intermediate court held that the Croatian Privatization Fund was a foreign
entity entitled to FSIA immunity. [FN101] In World Wide
Minerals, Ltd. v. Republic of Kazakhstan, the court of appeals held that the
district court lacked jurisdiction to adjudicate a variety of contract claims
asserted by an entity granted *138 management rights over a state-owned
uranium mining enterprise in Kazakhstan. [FN102]
Two district courts found privatization in
other countries to be within the commercial activities exception of the FSIA. [FN103] To be sure,
"[e]ngaging in a program of privatization does not automatically insulate
[another state] from suit in the United States." [FN104] But it is well accepted that the applicability of the
commercial activities exception is determined, not with reference to the
purpose of the entity claiming immunity under the FSIA, but with reference to
the specific activities drawn into question in the litigation. In Ampac Group,
Inc. v. Republic of Honduras, the activity in litigation was "[t]he sale
of a company from its owners to the highest bidder [which] is a routine
commercial transaction." [FN105] In the case of
Kosovo, many activities *139 in potential litigation would be policy
decisions by the Kosovo Trust Agency ("KTA") board relating to how
privatization should be conducted after an earlier phase of commercialization
under the direction of another agency. [FN106]
Privatization disputes also may be insulated
from litigation in third countries by the act of state doctrine, which requires
the dismissal of certain national court
lawsuits when deciding the merits would require the court to rule on the
validity of acts performed by a foreign government. [FN107] In World Wide
Minerals, Ltd. v. Republic of Kazakhstan, the court of appeals held the act of
state doctrine foreclosed litigation of certain claims involving privatization
as to which the state of Kazakhstan and its instrumentalities had waived
immunity. [FN108]
*140 III.
Past Practice and Models
A. Secession and National Disintegration
1. Yugoslavia
Yugoslavia presents an especially complicated
case. [FN109] Two
revolutions were overlaid by the dissolution of a state. Persons owning
property before the Communist revolution presided over by Josip Tito stand in
line alongside persons with property interests derived from the Tito regime--
perhaps as part of a worker community. They compete with persons who obtained
property during Slobodan Milosevic's discriminatory privatization regime. [FN110] By the time of its dissolution, Yugoslavia was one of the
most heavily indebted states involved in the transition from socialism, owing
some $15 billion in 1991, [FN111] and having
participated in two rounds of major debt restructuring in 1983 and 1988. [FN112] "Allocated debt"--debt incurred for the benefit of specific republics--amounted
to about $12 billion, and "unallocated debt"--debt incurred by the
federal government for purposes not easily identified with a specific
republic--accounted for the $3 billion remainder. [FN113] The Socialist Federal Republic of Yugoslavia
("SFRY") owed $683 million to the International Monetary Fund
("IMF") and $2 billion to the World Bank. [FN114] A 1993 estimate concluded that as of 1990 the net assets
of the SFRY were about $60 billion, with military assets comprising 75%,
immovable assets 3.4%, and financial assets 21.6%. [FN115]
Negotiations over the apportionment of and
succession to Yugoslav assets and debt began soon after international
recognition of the former Yugoslav republics of Slovenia and Croatia in
1991-1992. Three international peace conferences on the former Yugoslavia
addressed succession, without significant results. [FN116] A negotiated
solution was frustrated until *141 2001 by rump Yugoslavia's insistence
that no dissolution of Yugoslavia had occurred and, instead, that rump
Yugoslavia was the "continuator" state. [FN117] All of the breakaway republics and the international community
disagreed. [FN118] In Republic of Croatia v. Girocredit Bank A.G. der
Sparkassen, the Austrian Supreme Court enjoined rump Yugoslavia from disposing
of assets represented by an account in an Austrian bank, holding that, after
the dissolution of Yugoslavia, the assets represented joint property of the
successor states. [FN119]
A
further barrier to negotiations was the fact that most of the assets were held
by one successor state--the Federal Republic of Yugoslavia ("FRY").
Moreover, the FRY had spent most of the foreign currency reserves. [FN120] Disagreements
existed over the proper date to use for dissolution, a date that significantly
impacted valuation. [FN121] In addition,
Slovenia argued that Yugoslav "connected persons" should be excluded
as beneficiaries of any negotiated agreement. [FN122] And, what constituted "state property" was
blurred by the Yugoslav concept of "social ownership." If
socially-owned property were excluded, the level of assets would be diminished
significantly. [FN123]
The lack of success with the international conference
approach to resolving succession issues, combined with the desire of the
breakaway republics to normalize their relations with the international
financial community, led all to embrace direct negotiations as the
institutional mechanism for determining succession. [FN124] These direct
negotiations resulted in agreement on several important issues, including
assignment of allocated debt to the republic for whose benefit the debt had
been occurred, conforming to customary international law, [FN125] and determination of a *142
"key"--percentages for apportioning nonallocated debt to each
breakaway republic. [FN126] Separate
bilateral agreements were then reached between the successor states and the
London and Paris Clubs, which dealt with the bulk of the former Yugoslavia's financial liabilities, [FN127] mostly following the pattern set by the IMF and World Bank
negotiations as to assignment of allocated debt and the key for apportionment
of unallocated debt. [FN128]
After Milosevic stepped down as leader of
rump Yugoslavia, that state abandoned its position that it was the continuator
state and agreed that Yugoslavia had dissolved. [FN129] Shortly
thereafter, the five former states of the SFRY reached an agreement regarding
various succession issues in June 2001, using the IMF key. [FN130] All five successor states signed the Agreement on
Succession Issues Between the Five Successor States of the Former State of
Yugoslavia ("Agreement") on June 29, 2001. [FN131]
A percentage of the former Yugoslavia's
assets, not distributed according to previous bilateral agreements, were
divided up among the successor states. [FN132] All immovable state property of the former Yugoslavia was
passed to the successor state on whose territory the property was currently
situated. [FN133] Movable state property of the former Yugoslavia was passed
to the successor state in whose territory the property was located on the date
that state declared independence. [FN134]
*143 A joint committee of senior
representatives of each successor state was created to serve as a forum to
address issues arising from the implementation of the Agreement on Succession
Issues. [FN135] Any
disagreements over the interpretation or application of the Agreement on Succession Issues were first to be resolved by
discussion among the concerned states. [FN136] If the
disagreement could not be resolved through discussions within one month, the
concerned states could refer the matter to either an independent person or the
joint committee. [FN137]
The Agreement on Succession Issues was to
come into force thirty days after ratification by all five states. [FN138] By July 2002,
all but Croatia had ratified the Agreement on Succession Issues, [FN139] with Croatia finally ratifying in March 2004. [FN140]
2. Soviet Union
In the case of the dissolution of the Soviet
Union, insistence on international legal norms played a relatively small role.
Creditor states used leverage in negotiations, withholding recognition and
access to the international financial system until successor states agreed to
be obligated by the debt of the former Soviet Union. [FN141]
The negotiations were driven by Russia's
desire to assume both assets and debts, and by mistrust of the international
financial community that successor states except for Russia would ever be in a
position to satisfy their obligations. [FN142]
In order to privatize the Russian state-run
oil industry, the Russian industry was carved up into regional monopolies and
joint (public and private) stock companies were created. [FN143] At first, the
Russian government sold shares of the
state-run companies through vouchers only to workers *144 and Russian
citizens. [FN144] Later, foreigners were allowed to purchase any remaining
shares. [FN145] Russia did not completely privatize its oil industry; nor
did it privatize all state companies, and it retained state ownership of some
of the stock in other companies. [FN146]
Various problems have plagued the Russian oil
privatization plan. In 1995, large blocks of shares in many state-run oil
companies were auctioned off to a group of Russian banks in exchange for cash. [FN147] The insider
dealings of the politically connected banks discredited Russian privatization. [FN148] Additionally, the use of vouchers and the initial denial
of foreign investment resulted in lower revenues for the Russian government. [FN149]
3. Czechoslovakia
The former Czechoslovakia is another
complicated example, where:
distribution of assets was substantially
more complicated than the allocation of debts. The reasons for the difficulties
encountered in distributing assets were (1) the majority of the institutions
were still in the state hands[;] (2) since the Velvet Revolution of 1989, the
republics had practically no legal or institutional base for a market economy;
(3) privatization, in the form of vouchers, had already begun by the former
Czechoslovakian government to citizens of both republics, prior to dissolution;
and (4) tension existed between the republics due to the disproportionately severe effects of
privatization on the Slovak Republic. [FN150]
Originally, every adult citizen of the Czech
Republic was given privatization vouchers. [FN151] These vouchers could be used to purchase shares of SOEs. [FN152]
Corruption and an inadequate legal system
allowed this privatization program to be exploited. [FN153] For example,
one entrepreneur, Viktor Kozeny, created an "investment fund" that
collected vouchers from more than *145 820,000 Czech citizens. [FN154] Kozeny began siphoning off money from the fund, and
individual shareholders lost most of their money. [FN155] In 2003, Kozeny was indicted for fraud in the Czech
Republic and the U.S. [FN156]
B. Regime Change Through Revolution or Conquest
International law treats regime change
differently from state succession. Regime change involves substitution of one
government for another, with the sovereignty of the state remaining intact.
State succession involves changes in state sovereignty over a territory. U.S.
courts consistently have applied this distinction in cases involving the
Communist revolution in China, [FN157] the 1917 Russian Revolution, [FN158] post-World War II Germany, [FN159] and more recent coups in Sudan. [FN160]
Nevertheless, regime change often creates situations in which the
ordinary national legal machinery is unacceptable as a way of resolving
disputes over changes in property rights incident to the change. Machinery
established to deal with claims arising from the Holocaust, from the Islamic
revolution in Iran, and from the U.S.-led invasion of Iraq provide recent
examples.
*146 1. Iran
The Iran-U.S. Claims Tribunal
("Tribunal"), [FN161] characterized as an
"international arbitral tribunal," [FN162] was established after the revolutionary government of Iran
released American hostages in order to permit Iran to regain its international
financial position. Establishment of the Tribunal led to lifting various attachments
and liens on its assets resulting from piecemeal litigation in the regular
courts. [FN163] The Tribunal:
has jurisdiction to decide claims of United
States nationals against Iran and of Iranian nationals against the United
States, which arise out of debts, contracts, expropriations or other measures
affecting property rights; certain "official claims" between the two
Governments relating to the purchase and sale of goods and services; disputes
between the two Governments concerning the interpretation or performance of the
Algiers Declarations; and certain claims between United States and Iranian
banking institutions. [FN164]
Purely private claims--those by private
persons against private persons--were excluded.
One case, Riahi v. Government of the Islamic Republic of Iran, illustrates the
scope of the Tribunal's jurisdiction over private claims. [FN165] The plaintiff
alleged that Iran expropriated shareholder and *147 creditor interests
in several enterprises, including ownership interests in an apartment building
and personal property located therein, two automobiles, four horses, and
certain other property. [FN166]
An estimated 1,000 claims for $250,000 or
more and 2,800 claims for less than $250,000 were filed before January 19,
1982. [FN167] Claims were
decided by one of three three-member Chambers of the Tribunal or by the Full
Tribunal. [FN168] Rules of decision were the UNCITRAL arbitration rules, as
modified by the governments and the Tribunal. [FN169] Awards in favor of U.S. claimants were payable from an
account established by Iran at the Settlement Bank of the Netherlands. [FN170]
By October 2003, the Tribunal had terminated
880 claims by decision or order, and had caused nearly $2.2 billion to be
awarded to U.S. parties. [FN171]
2. Iraq
The United Nations Compensation Commission
("UNCC") [FN172] was created by the U.N. Security Council in 1991 to
resolve claims growing out of Iraq's invasion of Kuwait. [FN173] Iraq, however, failed to cooperate, and the UNCC and the
U.N. Compensation Fund ("Fund") operated under a variety of ad hoc
arrangements until adoption of Security Council Resolution 1330 in 2000, which established a 25% level of funding. [FN174]
The UNCC accepted claims by individuals,
corporations, and governments, submitted by governments, and claims submitted
by international *148 organizations for individuals who were not in a
position to have their claims filed by a government. [FN175] Under the
rules adopted by the UNCC, claims, including claims of individuals and private
corporations, could be submitted only by governments or other persons or
entities specifically authorized. [FN176] Eligible
claims included those for losses occasioned by forced departure from Iraq;
losses of personal property, bank accounts, stocks and other securities,
income, real property, construction, or other contract losses; losses from the
nonpayment for goods or services; losses related to the destruction or seizure
of business assets; loss of profits; oil sector losses; and individual business
losses. [FN177] Deadlines were established for presentation of claims, the
latest of which expired in 1997. [FN178] As of October
27, 2004, the UNCC reported that approximately 99% of claims totalling some
$277 billion had been resolved, with nearly $49 billion awarded, and over $18
billion actually paid. [FN179]
After the U.S.-led invasion of Iraq in 2003,
the U.N. Security Council linked the UNCC and the Fund to the new governing
institutions of Iraq under the Occupying Authority and Governing Council and
provided for continuing funding of the Fund. [FN180] It also stayed national legal proceedings against proceeds from petroleum and other energy
products, pending establishment of a representative government and a
restructuring of Iraq's debt. [FN181]
*149 3. The Holocaust
A Claims Resolution Tribunal ("Holocaust
Tribunal") [FN182] was
established in 1997 to resolve claims by Holocaust victims and their successors
to dormant Swiss bank accounts, assets deposited in Swiss banks before and
during World War II, and to claims arising under insurance policies issued to
victims of Nazi persecution by Swiss insurance companies. The Holocaust
Tribunal was funded by a settlement from the Holocaust Victim Assets class
action litigation against Swiss banks in U.S. district court. [FN183] Under the settlement, Swiss banks paid $1.25 billion in
exchange for the release of all claims relating to the Holocaust and World War
II. [FN184] The Holocaust Tribunal illustrates the use of class action
litigation under U.S. law as a mechanism to force negotiation of claims dispute
resolution machinery in the international context. [FN185]
A separate International Commission on
Holocaust Era Insurance Claims
("ICHEIC") was established in 1998 to resolve claims arising
from insurance policies issued prior to and during the Holocaust. [FN186] The ICHEIC was
established through negotiations involving European insurance companies, U.S.
insurance regulators, representatives of international Jewish and Holocaust
survivor organizations, and the State of Israel. [FN187] The signatory *150
insurers promised to fund claims awards. [FN188] As of early
2004, the ICHEIC had received nearly $500 million to pay claims and had paid
$16 million to claimants. [FN189] As of November
2004, ICHEIC had offered $108 million for Holocaust-era insurance policies. [FN190]
In In re Assicurazioni Generali S.P.A.
Holocaust Insurance Litigation, however, a district court denied a motion to
dismiss on the ground of forum non conveniens, finding that the ICHEIC was an
inadequate alternative forum. [FN191] The court distinguished such a private dispute resolution
body from a public court, characterizing it as a "company store,"
dependent on interested parties. [FN192]
4. Bulgarian Reprivatization Law
Separate Bulgarian laws compensated for
farmland expropriated or voluntarily granted to the state [FN193] and for other
real estate expropriated by the state. [FN194] If the
claimant was a foreign corporation, foreign national, or a Bulgarian citizen
permanently residing abroad, any restored farmland must have been transferred
within three years to a Bulgarian citizen, the state, or a Bulgarian corporation
or cooperative. [FN195]
Individuals or their heirs could have their
real estate restored. [FN196] A corporation's expropriated real estate could be restored
to the corporation if it was still existing at the time the reprivitazation law
was enacted. [FN197] If the
corporation no longer existed at that time, the real estate was restored to the associates or members of
the corporation or their heirs. [FN198]
*151 Expropriated farmland was
compensated by restoring ownership of the land to the claimant if the original
boundaries of the property could be determined and remained in existence. [FN199] If the
original boundaries did not exist, expropriated farmland was compensated by
providing the original owner with farmland equivalent in quantity and quality
within the same local area. [FN200] If
compensation was previously granted for expropriated farmland, the original or
equivalent farmland would be granted to the original owner only if he or she
returned the compensation. [FN201]
Nationalized real estate was restored to its
original owner. [FN202]
When the reprivatization law went into effect on February 17, 1992, the real
estate must have been owned by the state, a township, or a public organization.
[FN203] The real estate also had to exist in the same dimensions
as it did when the property was expropriated. [FN204] If these two conditions were not met, the original owner
was still entitled to compensation under "a procedure laid down in a
separate enactment." [FN205] Real estate was not restored if the original
owner previously had been compensated with an equivalent cash payment or with
real estate of equal value. [FN206] If a person
already occupied the property, the tenant could not be removed for three years
following the enactment of the law. [FN207] The current
tenant, however, had to pay rent to the
restored owner. [FN208]
Original owners of expropriated real property
that had been part of the long-term assets of a state- or municipal-owned
enterprise were compensated with shares of stock in the company formed by the
privatization of *152 such enterprises equal to the value of the
expropriated property. [FN209] If the original owner previously had been given any kind
of compensation for the expropriated real property, compensation was not
granted. [FN210]
A claim for farmland was required to be
submitted to the Municipal Land Board within seventeen months after the
reprivitzation law came into force. [FN211] Any application for compensation for farmland was
available to the public for examination. [FN212] The Municipal
Land Board determined whether the original property would be restored or
whether equivalent property would be granted. [FN213] The Municipal Land Board's decision could be appealed to a
district court within fourteen days of notification. [FN214] The district court reviewed the claim de novo. [FN215]
Claims for real property that had been part
of the long-term assets of a state- or municipal-owned enterprise had to be
filed by September 30, 1994. [FN216] Claims for SOEs were submitted to the Council of
Ministers, and claims for municipal enterprises were submitted to the local
municipal council. [FN217] Decisions
could be appealed to a district court within fourteen days after notice had
been received. [FN218]
5.
Hungarian Reprivatization Law
All private property that was nationalized or
taken from its original owner under coercion between 1939 and 1987 was eligible
for compensation, [FN219] including both real and personal property. [FN220] A claimant had to be a *153 natural person. [FN221] Both current Hungarian citizens and non-Hungarian citizens
could claim lost property. [FN222] Non-Hungarian
citizens, however, could claim property only if they were a Hungarian citizen
on the date the property was taken, if they were a non-Hungarian citizen whose
property was lost in connection with the deprivation of his or her Hungarian
citizenship, or if they were a resident of Hungary on December 31, 1990. [FN223]
If the former owner of the property was
deceased, his descendant was entitled to compensation up to the share due to
the former owner. [FN224] A surviving spouse could collect the compensation if the
former owner had no surviving descendants and the spouse and the former owner
were married and living together both at the time of the former owner's death
and at the time the property was taken away. [FN225]
The only form of compensation available was
transferable, bearer securities called compensation coupons. [FN226] A lump sum
payment for the value of the lost property was granted in compensation coupons.
[FN227] Compensated real property was valued between 200 to 2,000
Forints per square meter, depending on the
property's location. [FN228] The value of
farmland was calculated differently. [FN229] Farmland was
compensated based on the registered net income of the land. [FN230] The compensated value for a lost company was based on the
number of employees. [FN231] The
compensation for various movable assets (i.e., wedding rings, necklaces, and
watches) was established by the object's weight and composition. [FN232]
The value of property was compensated 100% up
to 200,000 Forints. [FN233] If the value of the property exceeded 200,000 Forints,
only a percentage of the value above 200,000 Forints was compensated. [FN234] The *154 maximum amount of compensation granted per
owner for each piece of property could not exceed 5,000,000 Forints. [FN235]
Compensation coupons could be used to
purchase shares of businesses privatized by the state. [FN236] Compensation
coupons also could be used to purchase farmland and state-owned apartments. [FN237] Some of the farmland owned by the state was sold at
auction, with only those who own compensation coupons being allowed to bid. [FN238] Any farmland purchased at such an auction had to be used
for agricultural purposes for five years. [FN239] If the
farmland was not used for agricultural purposes for five years, the property
was transferred back to the state, and compensation was not given. [FN240] Additionally, if the government auctioned property once
owned by a claimant, the claimant was entitled to bid on the lost property. [FN241]
A
claimant was required to file an application for compensation with a local
Hungarian Compensation Office by March 15, 1994. [FN242] The local
Compensation Office at which the claimant filed an application decided the
amount of compensation. [FN243] The local
Compensation Office's decision could be appealed to the National Compensation
Office, [FN244] and a Hungarian court could hear appeals from the National
Compensation Office. [FN245]
IV. Power to Extinguish Preexisting Rights
The success of any system for claims
resolution depends either on voluntary waiver of preexisting rights, as in the
ICHEIC system, [FN246] or
the *155 effective exercise of governmental power to extinguish those
rights. The inherent cross-border nature of claims incident to state succession
and of certain controversies involving regime change necessitates attention to
the power of international institutions or of individual sovereigns to
extinguish rights in order to reinforce comprehensive claims resolution.
A. Executive Power Under U.S. Law
The U.S. Government has followed a long
practice of diverting private international claims from its regular courts to
specialized claims settlement machinery. The most recent instance, involving
claims against Iran, resulted in Supreme
Court litigation which reviewed the history and validated the practice.
After the Iranian government seized hostages
at the U.S. Embassy in Tehran on November 4, 1979, President Carter exercised
emergency powers under the International Emergency Economic Powers Act
("IEEPA"). [FN247] President Carter declared a national emergency on November
14, 1979, blocking the removal or transfer of "all property and interests
in property of the Government of Iran, its instrumentalities and controlled
entities and the Central Bank of Iran which are or become subject to the
jurisdiction of the United States," delegating to the Secretary of the
Treasury authority to implement the freeze. [FN248] On November
15, 1979, the Treasury Department's Office of Foreign Assets Control issued a
regulation providing that "[u]nless licensed or authorized . . . any
attachment, judgment, decree, lien, execution, garnishment, or other judicial
process is null and void with respect to any property in which on or since
[November 14, 1979] there existed an interest of Iran." [FN249]
When the hostages were released on January
20, 1981, the U.S. entered into an agreement brokered by the Algerian
government to establish an Iran-U.S. Claims Tribunal. The stated purpose of the
agreement and the Tribunal was "to terminate all litigation as between the
Government of each party and the nationals of the other, and to bring about the
settlement and termination of all such claims through binding
arbitration." [FN250] Awards *156 of the Tribunal
were "final and binding" and to be enforceable "in the courts of
any nation in accordance with its laws." [FN251] The agreement obligated the U.S. to:
terminate all legal proceedings in United States
courts involving claims of United States persons and institutions against Iran
and its state enterprises, to nullify all attachments and judgments obtained
therein, to prohibit all further litigation based on such claims, and to bring
about the termination of such claims through binding arbitration. [FN252]
The agreement also obligated the U.S. to
"bring about the transfer" by July 19, 1981, of all Iranian assets
held in this country by American banks. [FN253] "One billion dollars of these assets [was to] be
deposited in a security account in the Bank of England, to the account of the
Algerian Central Bank, and used to satisfy awards rendered against Iran by the
[Tribunal]." [FN254]
President Carter issued a series of executive
orders implementing the terms of the agreement. [FN255] These orders
revoked all licenses permitting the exercise of "any right, power, or
privilege" with regard to Iranian funds, securities, or deposits;
"nullified" all non-Iranian interests in such assets acquired
subsequent to the blocking order of November 14, 1979; and required those banks
holding Iranian assets to transfer them "to the Federal Reserve Bank of
New York, to be held or transferred as directed by the Secretary of the Treasury." [FN256]
Then in 1981, newly inaugurated President
Reagan issued an executive order in which he ratified the Carter executive
orders, suspended "all claims which may be presented to the
[Tribunal]," and provided that "such claims shall have no legal
effect in any action now pending in any court of the United States." [FN257] The suspension
of any particular claim terminates if the Tribunal determines that it has no
jurisdiction over that claim; claims are discharged for all purposes when the
Tribunal either awards some recovery and that amount is paid, or determines
that no recovery is due. [FN258]
In Dames & Moore v. Regan, the U.S.
Supreme Court rejected challenges brought by a creditor of the Government of
Iran, Iran's atomic energy agency, and several Iranian banks to the executive
orders freezing the *157 removal or transfer of property of the
Government of Iran. [FN259] The Court held that the IEEPA gave the President authority
to freeze assets [FN260] and that the
President had inherent Constitutional power, acquiesced to by the Congress, to
suspend judicial enforcement actions in U.S. courts. [FN261] The Court stated:
Not infrequently in affairs between
nations, outstanding claims by nationals of one country against the government
of another country are "sources of friction" between the two
sovereigns. To resolve these difficulties, nations have often entered into
agreements settling the claims of their
respective nationals. As one treatise writer puts it, international agreements
settling claims by nationals of one state against the government of another are
established international practice reflecting traditional international theory.
Consistent with that principle, the United States has repeatedly exercised its
sovereign authority to settle the claims of its nationals against foreign
countries. Though those settlements have sometimes been made by treaty, there
has also been a longstanding practice of settling such claims by executive
agreement without the advice and consent of the Senate. . . . It is clear that
the practice of settling claims continues today. Since 1952, the President has
entered into at least 10 binding settlements with foreign nations, including an
$80 million settlement with the People's Republic of China. [FN262]
The Court noted the enactment of the
International Claims Settlement Act
("ICSA") in 1949, [FN263] which provided for the allocation to U.S. nationals of
funds received in the course of an executive claims settlement with Yugoslavia,
and established a procedure to distribute funds resulting from future
settlements through the Foreign Claims Settlement Commission. [FN264] "To achieve these ends Congress created the
International Claims Commission, now the Foreign Claims Settlement Commission,
and gave it jurisdiction to make final and binding decisions with respect to
claims by United States nationals against settlement funds." [FN265]
The Court further observed that, "[i]n 1976, Congress authorized
the Foreign Claims Settlement Commission to adjudicate the merits of claims by
United States nationals against East Germany," and subsequently, claims
against Vietnam. [FN266] The Court noted:
The constitutional power of the President
extends to the settlement of mutual claims between a foreign government and the
United States, at least when it is an incident to the recognition of that
government; and it *158 would be unreasonable to circumscribe it to such
controversies. The continued mutual amity between the nation and other powers
again and again depends upon a satisfactory compromise of mutual claims; the
necessary power to make such compromises has existed from the earliest times
and been exercised by the foreign offices of all civilized nations. [FN267]
Although the terms of the executive orders
and Treasury regulations did not require deciding whether the power to freeze
assets and suspend claims pending in jurisidical tribunals extends to purely
private claims--those by natural or juridical persons against other private
persons--the Court's reasoning suggests that the powers would include such
claims, as long as such a broad exercise was justified as necessary in the
interest of U.S. foreign policy.
The Court declined to address the argument
that suspension of its claims constituted a taking of property in violation of
the Fifth Amendment because of the possibility that the Tribunal would provide
adequate compensation, supplemented as
necessary by a claim for any deficiency under the Tucker Act. [FN268]
Apart from the specifics of the Tribunal, a
statutorily established claims commission, the Foreign Claims Settlement
Commission, [FN269] has
authority to resolve claims by U.S. nationals against specified governments,
including those of Yugoslavia, Bulgaria, Hungary, Romania, Italy, the Soviet
Union, Czechoslovakia, Cuba, China, East Germany, and Vietnam. [FN270] Decisions by the Foreign Claims Settlement Commission are
exempt from judicial review. [FN271]
*159 B. German, French, British, and EU
Counterparts to Dames & Moore
Commentators have suggested that all Western
legal systems are likely to embrace reasoning similar to that used by the U.S.
Supreme Court in Dames & Moore. [FN272]
C. U.N. Security Council Resolution 1483
In its resolution pertaining to post-invasion
of Iraq, the U.N. Security Council purports to obligate states to freeze assets
belonging to Iraq and to suspend claims and enforcement proceedings relating to
Iraq oil revenues. [FN273] There is no international mechanism for testing the power
of the Security Council to exercise such a power, other than state recognition.
So far, it appears that states are honoring
the freeze and suspension.
V. Kosovo's Unique Situation
Claims disputes in Kosovo are characterized
by a number of unique--or at least unusual--features of Kosovo as a constituent
unit of the former Yugoslavia, with ambiguous legal personality within
Yugoslavia, subjected to ten years of exploitation by the Milosevic regime in
Yugoslavia, and then a period of international political trusteeship. [FN274]
The Yugoslav experience means, first, that
some private property was expropriated by the socialist government after the
Second World War; second, that much property was held in "social
ownership" in SOEs; and third, that assets owned by the Yugoslav state and
Yugoslav state enterprises were potentially subject to various freezes and
trading embargos imposed by the U.S. and other states incident to the wars in
Croatia, Bosnia, and Kosovo. [FN275] Expropriation raises all the issues of claims resolution
usually incident to expropriation in other states. [FN276] Social ownership presents some *160 special
problems because ownership of SOEs was highly ambiguous. [FN277] The state retained some attributes of ownership of some
assets. [FN278] Possession, however, was the right of SOE employees,
represented through workers' councils, with municipalities in which SOE assets
were located also having rights and powers resembling those of trustees holding
property rights on behalf of the workers. [FN279] This murky set of legal relationships was further
complicated by privatization or "transformation" of many SOEs during
the Milosevic period. [FN280]
Succession issues are even more complicated
in Kosovo and are not addressed by the Agreement on Succession Issues. [FN281] Kosovo, formerly
an autonomous province of the Republic of Serbia within Yugoslavia, has been,
since June 10, 1999, under the civil administration of the U.N., operating
through the United Nations Interim Mission in Kosovo ("UNMIK"),
backed by a NATO security force called the Kosovo Force ("KFOR").
In Kosovo, conflicting claims to property,
such as apartments, exist between Serbs who left Kosovo after NATO and the U.N.
arrived, the international institutions conducting the civil administration,
the provisional institutions of self-government in Kosovo, Kosovar Albanians,
or other Serbs. Kosovar Albanians have claims to pension assets held in Serbia.
A variety of commercial entities around the world have claims to assets that
were privatized by the Milosevic regime and then renationalized and
reprivatized through the privatization process under U.N. administration. [FN282]
Sorting all this out is made more difficult
by the parallel state run by the Albanians during the Milosevic regime, when
many transfers from *161 Albanians to Serbs were coerced and many
voluntary transfers to Albanians were not recorded, and by the chaotic
situation after the NATO bombing campaign in
1999, when property transfers from Serbs were allegedly coerced, and in many
cases not recorded. In addition, the Serbs, as part of their ethnic cleansing
campaign, deliberately destroyed many formal documents held by Kosovar
Albanians.
Resolution 1244 authorizes both civil and
security presences, which were agreed to by the FRY. [FN283] The resolution
requests the Secretary-General of the U.N. to appoint a "Special
Representative" ("Special Representative of the
Secretary-General" or "SRSG") to control the implementation of
the international civil presence. [FN284] The resolution
authorizes the SRSG to establish the civil presence in order to:
provide an interim administration for
Kosovo under which the people of Kosovo can enjoy substantial autonomy within
the Federal Republic of Yugoslavia, and which will provide transitional
administration while establishing and overseeing the development of provisional
democratic self-governing institutions to ensure conditions for a peaceful and
normal life for all inhabitants of Kosovo. [FN285]
Among other things, the SRSG is to perform
"basic civilian administrative functions where and as long as
required," [FN286] to
transfer its administrative responsibilities to "local provisional
institutions," [FN287] to facilitate
a political process to determine Kosovo's future status taking into the account
the Rambouillet Accords, [FN288] and,
ultimately, to oversee the transfer of
authority from Kosovo's provisional institutions to institutions established
under a political settlement. [FN289] Most
significantly in conjunction with the subject of this Article--the SRSG is
authorized to support "the reconstruction of key infrastructure and other
economic reconstruction." [FN290]
On July 25, 1999, the SRSG promulgated UNMIK
Regulation 1999/1, exercising authority under Resolution 1244. Regulation
1999/1 provided, among other things, that the civil
administration--UNMIK--would perform its duties under Resolution 1244 by
"issue[ing] legislative acts in the *162 form of [UNMIK]
regulations." [FN291] UNMIK Regulation 2000/54, which amended Regulation 1999/1,
further provided that UNMIK would "administer movable or immovable
property which is in the territory of Kosovo, including monies, bank accounts
and other assets" as to which UNMIK has "reasonable and objective
grounds to conclude" is "property of, or registered in the name of,
the Federal Republic of Yugoslavia or the Republic of Serbia or any of their
organs," [FN292] or
"socially owned property." [FN293] UNMIK
administration of property pursuant to this authority "shall be without
prejudice to the right of any person or entity to assert ownership or other
rights in the property in a competent court in Kosovo, or in a judicial
mechanism to be established by [UNMIK] Regulation." [FN294]
In UNMIK Regulation 2000/47, the SRSG
declared that "UNMIK, its property, funds
and assets shall be immune from any legal process." [FN295]
On June 13, 2002, the SRSG established the
Kosovo Trust Agency ("KTA" or "the Agency") in UNMIK
Regulation 2002/12, explicitly citing authority under Resolution 1244 and
Regulation 1999/1. The KTA was established as an independent body, possessing
"full juridical personality," with the capacity to contract, acquire,
hold, and dispose of property, and to sue and be sued in its own name. [FN296] The KTA
reports through the reconstruction component of the civil administration. [FN297] The KTA was authorized to "administer publicly owned
and socially owned enterprises and related assets within the context of Section
8.1(q) of the Constitutional Framework." [FN298] The authority of the KTA expressly extended to "all
[e]nterprises *163 and assets within the scope of UNMIK Regulation
2000/63 . . . [e]stablish[ing] an Administrative Department of Trade and
Industry," and UNMIK Regulation 2000/45, providing for self government of
municipalities in Kosovo. [FN299]
The KTA also has authority to take "any
action, [with certain exceptions] . . . that the Agency considers appropriate to
preserve or enhance the value, viability, or governance" of the
enterprises. [FN300] The
authority expressly includes "[e]ntering into arrangements for the
management, reconstruction or reorganization of [e]nterprises." [FN301] The KTA may establish subsidiaries and transfer assets to
the subsidiaries, [FN302] restructure an
enterprise into several enterprises or corporations, [FN303] contract out part of
the activities of enterprises, [FN304] and initiate
bankruptcy proceedings. [FN305]
With respect to SOEs, the KTA, in addition to
its basic authority, is empowered to establish corporate subsidiaries of an SOE
and transfer SOE assets to the subsidiary, to sell shares of the subsidiaries,
to liquidate SOEs, and to dispose of monies and other assets of SOEs. [FN306] When
reorganizing SOEs, the KTA is authorized to strip the liabilities from assets
and to transfer the assets to investors free and clear of claims, and then must
place the money received for the assets from investors selected through an open
tender process into a trust, which then is available to satisfy claims
adjudicated by the Special Chamber of the Kosovo Supreme Court ("Special
Chamber"). [FN307] Twenty percent
of the proceeds of a spin-off must be reserved for employee claims. [FN308] Eligible employee claimants are those included on lists
for each SOE developed by the "representative body of employees in the
[SOE] concerned, in cooperation with the Federation of Independent Trade Unions
of Kosovo," and submitted to the KTA. [FN309] The KTA must
"review *164 the list and make such adjustments as it deems
necessary to ensure equitable access by all eligible employees to the funds to
be distributed." [FN310]
Section 18 of UNMIK Regulation 2002/12 limits
the liability of the KTA to its assets "plus the unpaid portion of its
subscribed capital," and imposes other
limitations on liability. [FN311] This section also waives UNMIK's immunity for the KTA, but
within sharply circumscribed channels. Unless extended by UNMIK regulation, the
KTA's authority expires three years after its establishment, or June 13, 2005. [FN312]
A. Existing Claims Dispute Machinery in Kosovo
The international civil administration in
Kosovo has set up two specialized legal regimes to handle claims with respect
to socially-owned property and residential property. These regimes are
incomplete, in that their scope excludes a significant universe of claims
likely to impede agreement on and implementation of any final status. They also
are imperfect in their operation. Moreover, other uncertainties in Kosovo are
likely to spawn new claims, including an incomplete property registration
system, [FN313] imperfect
functioning of the regular courts, [FN314] and failure of
several levels of executive authority to comply with procedures for
expropriating property. [FN315] In the
aggregate, these difficulties create a situation significantly out of
compliance with property-rights guarantees under the ECHR. [FN316]
1. Special Chamber of the Kosovo Supreme
Court
The UNMIK Regulation establishing the KTA
provides that "the Special Chamber shall have exclusive jurisdiction for
all suits against the [KTA]." [FN317] The Special Chamber
also has primary jurisdiction over claims, including creditor or ownership
claims, brought against an enterprise under *165 the authority of the
KTA, and claims involving rights in property in the possession or control of an
enterprise under the KTA's authority. [FN318]
Procedures before the Special Chamber reflect
common concepts of due process. Special Chamber procedures provide parties with
"a meaningful opportunity to have [their claims] adjudicated in an
impartial and transparent manner within a reasonable period of time and in
accordance with norms established under the ECHR and having regard to generally
accepted international standards." [FN319] Decisions of the Special Chamber must be in writing,
specifying reasons for the decision. [FN320] Parties may be
represented by counsel, including foreign counsel. [FN321] The Special Chamber allows written and oral submissions. [FN322] It provides for compulsory process for obtaining testimony
[FN323] and has procedures for obtaining evidence located outside
of Kosovo. [FN324] It allows expert reports, [FN325] compulsory production of documents and physical items, [FN326] and site visits. [FN327] All pleadings
and supporting documents must be submitted in English, but additional Serbian
or Albanian copies also may be submitted. [FN328] Discovery is
enforceable through monetary sanctions. [FN329] Oral as well
as written arguments can be made before the court, [FN330] and the parties have the option of invoking the appeals
process of the Special Chamber. [FN331] The Special Chamber also has the power to
afford a number of desirable remedies, including injunctions, [FN332] costs, [FN333] and monetary
compensation equivalent to the lost asset. [FN334]
The Special Chamber was designed to be as
impartial as possible. A majority of the judges on the Special Chamber's five
judge panel are international *166 judges, [FN335] with an
international judge serving as the presiding judge. [FN336] The Special Chamber has rules ensuring the impartiality of
its judges, which minimizes any concern of local partiality. [FN337]
Claims must be submitted to the Special
Chamber within nine months after the claimant knew or should have known of the
decision or other action giving rise to the claim by the KTA. [FN338] Claims only
are cognizable by the Special Chamber when the claimant has given prior notice
of the claim to the KTA. [FN339] Upon request
of the KTA, the Special Chamber may suspend any case filed with the Special
Chamber for an additional sixty days. [FN340] In the case of
liquidation, creditor claims must be filed with the Liquidating Committee
established by the KTA within sixty days of the second notification of the
liquidation proceedings. [FN341] Within thirty
days, the Liquidation Committee must determine whether to include a claim on
the schedule of claims for the liquidation, and must notify the claimant within
five days after its determination. [FN342] After a
Liquidation Committee is terminated, the KTA must
refer future claims to the Special Chamber. [FN343] The Special
Chamber must decide cases within two months after the completion of proceedings
in any case. [FN344] Protests over
lists of employees eligible for 20% of privatization proceeds must be submitted
to the Special Chamber within twenty days of the formal publication of the
list, and the Special Chamber must decide any such protest within forty days of
its submission. [FN345]
While the Special Chamber was functioning as
of March 2004, it got off to a slow start. [FN346] Because contracts for the first round of privatization by
the KTA were not signed until March 2004, and no liquidations under KTA
auspices had occurred as of the end of March 2004, the earliest that *167
privatization claims are likely to be decided by the Special Chamber is early
to mid-2005.
Whether the privatization regime in Kosovo
represents a partial solution to the problem of claims resolution in the
context of final status determination or whether it will become yet another
source of disputes depends on the legal status of the privatization
institutions under the sovereign immunity and act of state doctrines.
The KTA's decisions fall within the scope of
the act of state doctrine, although this proposition is not immune from
challenge. The KTA's decisions are those of a state for purposes of the
doctrine. The KTA, within its sphere of delegated authority under UNMIK
Regulation 2002/12, exercises legislative and executive
functions. The SRSG retains veto power over KTA decisions. [FN347] Judicial
deference for acts of state extends to duly authorized agents of the sovereign
state acting for governmental purposes.
The Court in Underhill v. Hernandez held that
the acts of a military commander in Venezuela were subject to immunity. [FN348] "The
immunity of individuals from suits brought in foreign tribunals for acts done
within their own states . . . must necessarily extend to the agents of
governments ruling by paramount force as matter of fact." [FN349] "[T]hat the acts of the defendant were the acts of
the government of Venezuela . . . are not properly the subject of adjudication
in the courts of another government." [FN350] The Court
broadly extended the protection of the sovereign to all agents acting under its
authority.
The KTA acts as the U.N.'s agent, authorized
by UNMIK Regulation 2002/12. The U.N. expressly empowered the KTA to engage in
privatization activities on its behalf. [FN351] Because the KTA is a U.N.-created body that is granted
authority to act on behalf of the Kosovo population, its public acts share the
same sovereign character as if those acts were performed by the U.N. itself.
The KTA's actions likely to be challenged in national court litigation were
authorized by the U.N. and thus fall within the act of state doctrine.
The Government of Kosovo is not fully
recognized on the international stage, but this does not affect legal treatment
of the acts performed by the KTA for two
reasons: (1) the Government of Kosovo, recognized or *168 not, is not
party to privatization decisions; and (2) as an authorized agent of the U.N.,
the KTA is accorded the same sovereign character as its parent. Because the
U.S. has recognized the sovereignty of the U.N. as an international body, [FN352] agencies and
instrumentalities of the U.N. in Kosovo enjoy the privilege of comity in U.S.
courts.
The act of state doctrine also extends to
contract cases. The Second Circuit held in Hewitt that the act of state
doctrine applied to contract actions involving sovereign entities as parties. [FN353] And while the
Supreme Court has never squarely addressed whether a contractual breach
implicates the act of state doctrine, lower courts have applied the doctrine to
such cases. [FN354]
Even if the activities of the KTA subject to
challenge fall within the commercial activities exception of the FSIA, that
does not foreclose judicial deference under the act of state doctrine because
the commercial activities exception is not part of the act of state doctrine.
In Dunhill, a majority of the Court did not accept the idea advanced by four
Justices that the act of state doctrine extends only to governmental acts and
not to commercial ones. The Court stated that "we are in no sense
compelled to recognize as an act of state the purely commercial conduct of
foreign governments." [FN355] Justice Stevens did not join in this part of the opinion. [FN356] Four dissenting justices
reasoned that even if the restrictive theory of sovereign immunity were adopted
(as it subsequently was in the FSIA) "it does not follow that there should
be a commercial act exception to the act of state doctrine." [FN357]
Subsequently, in Machinists v. Organization
of the Petroleum Exporting Countries (OPEC), the U.S. Court of Appeals for the
Ninth Circuit observed that "[t]he act of state doctrine is not diluted by
the commercial activity exception which limits the doctrine of sovereign
immunity. While purely commercial activity may not rise to the level of an act
of state, certain seemingly commercial activity will trigger act of state
considerations." *169[ FN358] The court held that price fixing activity by OPEC fell
within the act of state doctrine. [FN359]
The KTA acted to privatize SOEs within
Kosovo. While this sort of activity is undoubtedly intended to promote commerce
and the development of the institutions of a market economy, the KTA's role in
the endeavor was not commercial in nature. The KTA assumed a governmental role
in privatizing the enterprises, and it did so with proper authorization by the
U.N. The KTA's discretion in choosing the means of introducing private
investment, whether commercialization or privatization, and its choice of
investors is a necessary and legitimate exercise of its discretion and authority.
Even if the KTA's activities are
"seemingly commercial," a court is not foreclosed from applying the act of state
doctrine. Given the ultimate goals the KTA hopes to achieve through
privatization and the means it must use to reach those goals, a U.S. court's
second-guessing of those acts implicates the same policy concerns leading to
the act of state doctrine. Application of the act of state doctrine has always
been within the courts' discretion. When the activities that a court must judge
possess certain commercial characteristics, but still point to greater public
objectives as the KTA's privatization efforts most certainly do, the court
should recognize that applying the act of state doctrine is not only permitted,
but also necessary.
As in the Ninth Circuit OPEC case, granting
the relief a litigant is likely to request from a national court would "in
effect amount to an order from a domestic court instructing a foreign sovereign
[the international civil administration of Kosovo] to alter its chosen
means" of privatizing industry. [FN360] This is precisely the kind of interference in affairs within
the responsibility of the political branches that the act of state doctrine is
meant to avoid.
Beyond inserting the judiciary into
difficult, interrelated, and ultimately political controversies over the scope
of U.N. administration of Kosovo and approaches to privatization, a decision on
the merits by a national court would cripple the U.N.'s, UNMIK's, and the KTA's
ability to build an efficient market economy in postconflict Kosovo. Applying
the act of state doctrine will avoid that
result.
*170 In Bigio v. Coca-Cola Co., the
Second Circuit held that the "function of the court in applying the act of
state doctrine is to weigh in balance the foreign policy interests that favor
or disfavor [its] application." [FN361] "[T]he doctrine demands a case-by-case analysis of
the extent to which in the context of a particular dispute separation of powers
concerns are implicated." [FN362]
In Kosovo, the foreign policy concerns are
paramount, unlike in Bigio, where the only identifiable act of state was
decades old and had apparently been repudiated by the current foreign
government. In WMW Machinery, the court found governmental policy decisions
irrelevant to the issue in suit, [FN363] and in Ampac Group, the court, without much analysis,
found the transactions in dispute to be unquestionably commercial in nature,
and not linked to any Executive Branch objective. [FN364]
National courts should follow the example of
World Wide Minerals, Ltd. v. Republic of Kazakhstan, in which the court of
appeals affirmed application of the act of state doctrine to foreclose
consideration of a claim that refusal of an export license breached a contract
with the plaintiff. [FN365] Evaluating the KTA's decision to privatize rather than to
execute contracts contemplated by the U.N. before its creation would draw
national courts into ruling on the validity of the KTA's governmental
decisions.
2.
Challenges to the Special Chamber and Privatization Machinery
A number of criticisms have been aimed at the
privatization and claims resolution regimes in Kosovo, especially by Serb
interests. While designers of claims resolution machinery in conjunction with
final status determination need not necessarily accede to these criticisms, it
is appropriate to take them into account because they will shape the political
constraints within which any claims machinery must be negotiated.
a. Unauthorized Expropriation
The broadest of the criticisms asserts that
the transfer of property interests through the KTA represents an unauthorized
deprivation of property interests. This allegedly occurs at two levels. Most broadly,
critics claim that UNMIK's mandate does not extend to the compulsory transfer
of *171 property interests such as necessarily occurs when assets are
leased to investors for ninety-nine years through the privatization process.
Resolution 1244 authorizes the civil administration established by the
Secretary-General to "[support] the reconstruction of key infrastructure
and other economic reconstruction." [FN366]
This authority, it is argued, cannot be
construed to extend to the compulsory transfer of property interests incident
to developing a market economy. Rather, it is limited to short-term
reconstruction of physical assets and economic stabilization. While the
authority granted UNMIK to "[perform] basic civilian administrative functions where and as long as
required" [FN367] may
include the power to adjudicate competing property claims, it does not include
the power to conduct a forced sale to a third-party investor. Critics dispute
arguments that broader responsibility to "[promote] the establishment,
pending a final settlement, of substantial autonomy and self-government in
Kosovo," [FN368] to
"[organize] and [oversee] the development of provisional institutions for
democratic and autonomous self-government pending a political settlement,
including the holding of elections," [FN369] to
"[perform] basic civilian administrative functions where and as long as required,"
[FN370] to "[transfer], as these institutions are
established, its administrative responsibilities while overseeing and
supporting the consolidation of Kosovo's local provisional institutions and
other peace-building activities," [FN371] and to
"[promote] the establishment, pending a final settlement, of substantial
autonomy and self-government in Kosovo," [FN372] in the aggregate, necessarily implies the power to
restructure economic institutions through rearrangement of property interests,
in order to create sustainable economic prosperity through a market economy.
Critics also argue that the powers of UNMIK
should not exceed those of a "belligerent occupant" under
international law, whose power to change law and institutional arrangements is
strictly limited to measures necessary to protect security of occupying forces
and to assure the short-term welfare of local populations,
pending resumption of the government displaced by the occupation. [FN373]
*172 But this argument fails to take
account of the reality that Kosovo is not appropriately classified as a
belligerent occupant, where the preexisting sovereign is expected to return
intact. Resolution 1244 expressly contemplates a political settlement, in terms
of final status, that, whatever its form, will alter preexisting political
institutions and the structure of sovereignty. [FN374] The role of
UNMIK is better characterized as a political trusteeship, under which UNMIK, as
trustee, has the power to restructure property interests and legal and
political institutions whenever justifiable as useful in protecting and enhancing
the interests of the beneficiaries of the trusteeship--the people of Kosovo. [FN375]
Under a narrow view of the powers granted by
Resolution 1244, the assumption by UNMIK of "[a]ll legislative and
executive authority with respect to Kosovo," [FN376] and the
assumption of plenary power over all "movable or immovable property,
including monies, bank accounts, and other property of, or registered in the
name of the Federal Republic of Yugoslavia or the Republic of Serbia or any of
its organs, which is in the territory of Kosovo" [FN377] is ultra vires, because it exceeds the powers conferred by
the Security Council. Moreover, critics claim that the powers assumed by UNMIK
extend only to state property and not to property in social ownership.
But the Security Council has, since the issuance of Resolution 1244,
exercised continuous oversight over the U.N.'s administration of Kosovo,
receiving notice of UNMIK regulations and also receiving regular reports by the
Secretary-General and the SRSG, some of which have expressly referred to
privatization of socially-owned assets as a priority, and the machinery for
privatization and claims resolution. Failure by the U.N. Security Council to
take action to limit the exercise of this authority by UNMIK evidences
concurrence by the U.N. Security Council in the view that UNMIK's power
includes the power to privatize through the mechanism established by UNMIK.
Finally, critics of the privatization regime
argue that KTA has acted ultra vires in interfering with property interests in
enterprises outside its mandate. The KTA has authority only over socially-owned
and publicly-owned enterprises ("POEs") registered or operating in
the territory of Kosovo, expressly excluding those lawfully transformed into a
different form *173 of business enterprise. [FN378] The KTA has,
they argue, asserted authority over enterprises, and sold assets or intends to
sell assets belonging to enterprises that do not qualify as socially- or
publicly-owned. Such claims should be within the jurisdiction of the Special
Chamber to resolve, but critics argue that the power of the Special Chamber
should be congruent with that of the KTA. The Special Chamber has jurisdiction
over "[c]hallenges to decisions or other actions of [the KTA] undertaken
pursuant to Regulation No. 2002/12," [FN379] over "creditor or ownership claims, brought against
an Enterprise . . . currently or formerly under the administrative authority of
the [KTA]," [FN380] and over
claims "involving recognition of a right, title or interest in property in
the possession or control of [a business enterprise] currently or formerly
under the . . . authority of the [KTA]." [FN381] Critics argue that this grant of jurisdiction to the
Special Chamber excludes claims and challenges outside KTA authority.
b. Denial of Due Process
Even if KTA and Special Chamber authority
extends to enterprises and claims contended to be outside their authority,
critics argue that the procedures used by the KTA and the Special Chamber
violate European and international norms of due process. In particular, they
criticize the management of the KTA as biased because of inadequate Serb
representation on the board and staff. They claim that KTA's operating
procedures fail to assure adequate "due diligence" in classifying
enterprises as socially- or publicly-owned and thus within KTA's jurisdiction.
They argue that appointment of judges to the Special Chamber for relatively
short terms of six months and employment of judges as consultants to UNMIK
deprives them of the requisite independence.
c. Violation of the European Convention on
Human Rights
Critics of the KTA/Special Chamber machinery
argue that these substantive and procedural shortcomings of the privatization
process violate UNMIK's duty under the ECHR,
expressly made applicable in Kosovo by UNMIK. [FN382] Article 1 of
the First Protocol to the Convention guarantees *174 "peaceful
enjoyment of possessions," [FN383] and this
provision has been interpreted by the European Court of Human Rights to cover
cases of privatization and nationalization. States have wide latitude to
determine state interests that justify alteration of property relationships,
but the European Court of Human Rights has held that states must provide access
to fair judicial procedures to determine the compensation due for interference
with property rights.
3. Possible Solutions to Challenges to
Privatization Machinery
Overreaction to criticisms of the KTA and the
Special Chamber resulted in a number of roadblocks to privatization. After a
very promising start, privatization efforts were complicated by new EU
personnel, beginning with a freeze in October 2003, and followed by an effort
to substitute illogical operational policies that would not allow investors to
obtain clear title to assets. The result was significant political controversy,
pitting the Provisional Institutions of Self-Government ("PISG") and
the Kosovar trade union organization against the new management of the KTA.
This resulted in paralysis of the privatization machinery well into 2004.
Hopefully, these short-term controversies can
be resolved in a way that will allow privatization to continue, with disputes
over the extent of KTA and Special Chamber authority presented for adjudication
in the Special Chamber.
In
the longer run, however, a strategy must be adopted that provides for a more
robust and comprehensive mechanism for resolution of claims associated with
SOEs, POEs and their management, liquidation, and privatization. Any viable
strategy must include features that respond to the criticisms of the
KTA/Special Chamber machinery.
Such a strategy also must encompass the
universe of housing claims within the jurisdiction of the Housing and Property
Directorate [FN384] and
the other types of claims entirely outside the scope of the KTA/Special Chamber
and Housing Property Directorate institutions.
*175 4. Housing and Property
Directorate
UNMIK established a Housing and Property
Directorate ("Directorate") and a Housing and Property Claims
Commission ("Commission") in 1999. [FN385] The Directorate was empowered to register claims by
natural persons to residential property involving discriminatory revocation of
rights subsequent to March 1989, [FN386] or deprivation
of possession occurring before 1999. [FN387] The Commission
was empowered to "settle private non-commercial disputes concerning
residential property referred to it by the Directorate until the Special
Representative of the Secretary-General determines that local courts are able
to carry out the functions entrusted to the Commission." [FN388] The Commission is composed of one panel of two
international and one local members, who are all "experts in the field of
housing and property law and competent to
hold judicial office." [FN389]
Claims were required to be submitted to the
Commission by December 1, 2001. [FN390] Decisions are
enforceable by eviction by an officer of the Directorate and law enforcement
authorities. [FN391]
By the end of 2003, more than 25,000 claims
had been presented to the Commission and about half had been resolved. [FN392] Even so, the
Commission was not fully performing its mission because of confusion about
overlapping jurisdiction and impediments to enforcement of its decisions. [FN393]
The most serious limitation on the
effectiveness of the Commission is uncertainty as to the legal regime for
residential property claims not presented to the Commission by the December
2001 deadline.
B. Solving Problems Relating to Existing Machinery
Elements of a comprehensive claims resolution
strategy for Kosovo can take one of three basic approaches to claims and challenges
associated *176 with privatization and residential housing: ratify KTA,
Special Chamber, and Directorate decisions, while reinforcing and extending the
existing machinery; replace the existing machinery with a new set of claims
resolution institutions with broader jurisdiction; or provide new mechanisms
for review of KTA, Special Chamber, and Directorate decisions.
Choosing among these approaches will
necessarily involve a political resolution
of the controversies incident to each existing system. At the same time,
however, the process of designing and erecting new claims resolution machinery
should not interrupt progress in economic transformation, or introduce new
uncertainties for investors or claimants. The best approach would be one that
allows decisions made through the existing institutions to stand, ratifying
them in general, while affording narrow grounds for those aggrieved by those
decisions to seek compensation through new mechanisms.
In any event, a comprehensive claims
resolution system must address the significant subset of claims outside the
jurisdiction of the KTA, the Special Chamber, and the Directorate. These
include claims for interference with property interests not associated with
SOEs or POEs, pension claims by pension beneficiaries in Kosovo, [FN394] claims by any
new government of Kosovo for misappropriation of public funds by Serbia, claims
for personal injury and property damage associated with the Milosevic regime
and its ethnic cleansing activities (mostly Kosovar Albanian claims) and with
the NATO intervention (mostly Serb claims), and claims by Serbia for recovery
or offset of funds invested in enterprises and infrastructure in Kosovo.
VI. Proposed Structure for Claims Relating
to Kosovo
If Kosovo (or UNMIK as political trustee) and
Serbia-Montenegro reach an agreement on claims resolution, the two entities
could agree on a mechanism resembling the
Iran-U.S. Claims Tribunal. Issues may arise about the power of the two
signatories to alter legal relations involving other states or citizens of
other states.
If Kosovo and Serbia-Montenegro are unable to
reach agreement, two basic possibilities exist for orderly claims resolution.
The U.N. Security Council could mandate a process for resolving claims.
Alternatively, creditors could cooperate in "the shadow of the law"
(a very dim shadow, given the paucity of clear law on the subject) in a manner
resembling that which *177 occurred in connection with the breakup of
the Soviet Union, or in the nineteenth century [FN395] before the
first federal bankruptcy statute was enacted in 1898. [FN396] The literature on game theory and the prisoner's dilemma
in the context of international bankruptcy [FN397] suggests that
such cooperation would be unlikely and fragile, if it occurred at all.
Claims relating to Kosovo present a less
daunting challenge to the international legal system than efforts to develop a
comprehensive global system for handling international bankruptcies or a global
system for adjusting investment disputes; fewer players are involved, and an ad
hoc mechanism rather than a permanent one will suffice. Accordingly, any useful
evaluation of the possibilities for Kosovo claims should begin with an
identification of the key players, both state players and private stakeholders.
State players are those in which Kosovar or Serbian assets are located, or in
which claimants to property in Kosovo are
located. Switzerland, Germany, France, Great Britain, the U.S., Albania, states
formerly a part of Yugoslavia, Bulgaria, Turkey, Italy, and Greece probably
account for the lion's share.
A second, potentially simplifying, inquiry
relates to the magnitude of available assets, compared to the magnitude of
total claims. The Milosevic regime in Yugoslavia is widely viewed as having
dissipated most of the assets owned by the Yugoslav state. If the assets are de
minimis, then sophisticated claimants are unlikely to invest substantial
amounts of energy in aggressive battles over claims resolution.
*178 A. Specific Principles to Guide the
Design of a Claims Resolution System
1. Even though recognition of Kosovo as a new
state, separate from Serbia may not meet the usual prerequisites for
dissolution of the state of Serbia, the dissolution model in the Yugoslav
Agreement on Succession Issues should be followed.
Were Kosovo to become independent of Serbia,
succession issues would be addressed in a slightly different context from that
applicable to the independent republics of Slovenia, Croatia, Bosnia, and
Macedonia, although the pattern set by the Yugoslav Agreement on Succession
Issues [FN398] would be
difficult to avoid as the model for Kosovo. The principal difference is that Yugoslavia was treated as a case of dissolution
rather than continuation, [FN399] while the
secession of Kosovo more likely would be treated as a case of continuation.
Kosovo was an autonomous province of the Republic of Serbia, not a republic
within Yugoslavia. Accordingly, the relevant state from which Kosovo would
secede is Serbia, not Yugoslavia itself. Therefore, the conclusion that
Yugoslavia dissolved does not guarantee that Kosovo would be treated as a
successor state to Yugoslavia under the dissolution principle, rather than a
newly independent state, while the continuation state of Serbia retains the
preexisting legal personality. The main implication of treating the withdrawal
of Kosovo as a case of continuation rather than dissolution is that Serbia
would retain all of the assets of the predecessor state under customary
international law.
There is a counterargument, based on Kosovo's
1991 declaration of independence, which predated the declarations of
independence by Slovenia, Croatia, Macedonia, and Bosnia. If that declaration
of independence is accorded international recognition retrospectively, it would
be more plausible to treat Kosovo as a successor state to the former
Yugoslavia, with entitlements to assets and responsibilities for debts
determined under the Yugoslav Agreement on Succession Issues should it become a
signatory. Whether the other signatories would accept such an arrangement is,
of course, yet to be determined.
*179
2. Kosovo should accept responsibility for the allocated portion of Yugoslav
and Serbian debt--debt directly associated with projects and other benefits in
the territory of Kosovo.
This principle is appropriate so that the
claims resolution strategy for Kosovo can follow the basic pattern set by other
independent constituent units of the former Yugoslavia. Any economic
disadvantage to Kosovo from application of this principle can be mitigated by
appropriate apportionment of Serbian assets, increased by allowances for
corruption and waste. [FN400]
3. March 22, 1989, should be used for
determining debt and asset values to be apportioned to the states of Serbia and
Kosovo.
Adopting the same date as that used to
determine applicable law under UNMIK administration simplifies claims
administration and avoids problems associated with trying to frame some
aggregate method for dealing with the discriminatory Milosevic regime and the
parallel system.
4. Kosovo should be entitled to the same
percentage of Yugoslav assets as the percentage of Yugoslav debt apportioned to
it.
No apparent reason exists for adopting
different formulas for equitable allocation of assets and debt not readily
linked to particular territory, persons, or enterprises.
5. An adjustment should be made for
"waste" by the former Yugoslav regime.
The adjustment for waste should include
losses due to corruption and expenditures
for ethnic cleansing in Kosovo. Serbia-Montenegro should be required to account
for assets that have been spent and for military assets that have been
destroyed or rendered obsolete since the appropriate date for dissolution. [FN401]
6. Serbia-Montenegro should be entitled to an
adjustment for damage resulting from the NATO bombing campaign or the Kosovo
Liberation Army insurgency.
It will be politically difficult to arrive at
an agreement that charges Serbia with dissipation of assets associated with
systemic human rights *180 abuses and armed conflict without symmetrical
treatment of dissipation resulting from opposing armed conflict.
7. A "peace conference" approach is
more likely to be efficacious than a
"direct negotiations" approach.
While direct negotiations were effective in
resolving most private claims associated with the dissolution of the Soviet
Union and of the secession of the republics from Yugoslavia, such an approach
is far less likely to work in the case of Kosovo because of legal uncertainty
associated with the periods of parallel government, Serb exploitation, and
international administration. Moreover, a peace conference approach is
inevitable to resolve final status.
8. The PISG should negotiate on behalf of
Kosovo, with UNMIK participation and oversight.
No system for claims resolution will be
viable unless it is accepted by locally
accountable political institutions in Kosovo. The most efficient way to achieve
such acceptance is to empower the PISG to participate directly in negotiations
over claims resolution. Formal concerns about UNMIK's "reserved
powers" can be accommodated adequately by allowing UNMIK participation and
oversight, with periodic reporting to the U.N. Security Council by both the PISG
and the SRSG.
9. The claims resolution system should
include an adequate system for identifying assets available to satisfy claims
and subjecting them to the automatic stay.
The best way to assure appropriate disclosure
of the assets and liabilities subject to any claims resolution system is to
empower a claims resolution institution to undertake investigations and audits,
reinforced by an obligation for states in which assets may be located to
command cooperation by legal and natural persons subject to their sovereignty. [FN402] The
obligations for state cooperation expressed in Resolution 1483 pertaining to
Iraq are good models. [FN403]
*181 10. A fund must be established to
pay claims, financed by Serbian state revenues, Kosovar state revenues, and the
international community.
It is likely that claims will far exceed
available assets in value. In order for a claims resolution system to be
meaningful in such a situation some sort of fund
must be established to satisfy claims, as in the case of privatization in
Kosovo, [FN404] and the claims
resolution systems for Iran, [FN405] Iraq, [FN406] and the Holocaust. [FN407] A fund can be
financed by identified assets--which represents a way of sequestering those
assets--from streams of public revenues proportional to negotiated
responsibility for dissipation of assets, [FN408] and from
national and international governmental subsidies as necessary.
11. An automatic stay should be imposed as
soon as the claims resolution system is adopted.
Any dispute resolution mechanism intended to
include competing claims for the same asset and any mechanism intended to
assure the primacy of its decisions with respect to claims must include some
kind of automatic stay rule. [FN409] The automatic stay in the U.S. Bankruptcy Code operates to
suspend any "judicial, administrative, or other action or proceeding
against the debtor" once a petition is filed. [FN410] Although the extraterritorial effect of the automatic stay
in U.S. bankruptcy law is controversial, [FN411] this issue is
only one of many relating to coordination of transborder bankruptcies.
The doctrine of forum non conveniens in U.S.
courts and in the courts of other common law countries, [FN412] such as
England, [FN413] Scotland, Canada, *182[ FN414] and
Australia, obligates a court hearing a controversy
to dismiss a case that more properly should be heard in another tribunal. The
doctrine is unavailable in civil law countries because it violates strict
jurisdictional rules under procedure codes. [FN415] Even in those
countries, however, a related doctrine, lis pendens, allows staying an action
in favor of a similar action already pending in the court of another state, [FN416] presumably including courts established by a political
trustee.
Absent a treaty binding all states in which
parallel proceedings might be attempted or a U.N. Security Council resolution
similar to Resolution 1483, [FN417] an automatic stay provision in a claims resolution regime
for Kosovo, while desirable, cannot do more than automatic stay provisions in
the U.S. Bankruptcy Code and counterparts in other national bankruptcy regimes.
12. Private claims as well as
intergovernmental claims should be included.
A significant part of the universe of claims
associated with Kosovo are private, rather than governmental claims. Excluding
such claims would undermine the political utility of any claims resolution
system.
13. Private claimants should have standing to
present claims directly to claims resolution tribunals.
Forcing private claims to be presented only
through governments or international organizations, as in the case of the
Iran-U.S. Claims Tribunal, [FN418] affords the possible benefit of an initial, national law
screening mechanism. But the uncertainties
of the past and present legal regimes in Kosovo vitiate any such benefit in
Kosovo, where many of the likely claimants are located. Allowing private
presentation of claims, however, *183 necessitates some sort of legal
aid or simplified resolution process, as the Special Chamber has learned. [FN419]
14. A deadline of two years after
establishment of the claims resolution system should be imposed.
Any claims resolution system is unacceptably
open-ended unless it extinguishes claims not presented by a certain date. A
two-year deadline should be adequate and is commensurate with deadlines imposed
in all of the systems considered in this Article.
15. Valuation techniques should be those used
in other recent claims resolution systems.
Valuation of assets and claims is a major
challenge for any dispute resolution system. Controversies and the burden on
decisionmakers can be reduced by following standard practices in other models.
16. Decisions on private claims should be
insulated from collateral attack under appropriate recognition and enforcement
rules.
Any system for reallocating legal rights in
assets is ineffective unless the legal authorities of the place where the
assets are located are willing and able to compel one in physical control of
the assets to respect the decisions made in
the reallocation process. In part this depends on formal rules for recognition
and enforcement of judgments under private international law. It also depends
on the effectiveness of the legal system where the assets are located. Formal
recognition and the issuance of formal enforcement or execution orders are of
little value if there is no one who can apply coercive power to overcome
resistance to the orders. [FN420]
There is no multilateral convention on
jurisdiction of national courts or enforcement of foreign judgments, despite a
continuing effort by the Hague Conference on Private International Law to
negotiate a "convention on international jurisdiction and foreign
judgments in civil and commercial matters." [FN421] Private
international law, [FN422] supplemented
by European treaty law, [FN423] provides a
starting point for obligating all states to respect judgments *184
emerging from the Kosovo claims dispute resolution system under criteria that
discourage relitigation of the merits.
Acceptable levels of finality, however,
necessitate a U.N. Security Council resolution, or a broad multilateral treaty,
obligating member states or signatory states to take steps under national law
to ensure recognition and enforcement of Kosovo claims resolution decisions,
and to insulate them from collateral attack.
17. Claims should be tradable in the private
marketplace before and after they are presented to any claims resolution
tribunal.
Any mechanism for claims resolution should make it easy for claimants to
trade their claims to persons who may be willing to buy them, enhancing the
ability of the market to provide part of the solution. Some of the problems
arising with voucher systems for privatization [FN424] should be
avoidable in the case of Kosovo because of better general awareness of what
private claims are worth.
B. Composition of the Tribunal
Several models for constituting a Kosovo
claims tribunal are available. One model is that used for the Special Chamber
of the Kosovo Supreme Court. The SRSG designates five members of the Kosovo
Supreme Court, three international judges, one of whom serves as presiding
judge of the Special Chamber, and two judges who are residents of Kosovo. [FN425] This approach
suffers from the defect that Serb interests are unlikely to accept it as
legitimate.
The structure and membership of a Kosovo
claims tribunal also can draw upon the models of the Iran-U.S. Claims Tribunal
and the UNCC. The Tribunal has nine members, although the U.S. and Iran can
agree on a greater number of members, in multiples of three. [FN426] Each
government appoints one-third of the members. The partisan members thus
appointed name the remainder of the members and designate a President of the
Tribunal from among them. The tribunal sits en banc or in panels of three as
determined by the President.
The UNCC has a Governing Council and Commissioners, who assess losses
and recommend compensation to the Governing Council. [FN427] The *185
Governing Council comprises the members of the U.N. Security Council. [FN428] Commissioners are international jurists selected for their
integrity, experience, and expertise in such areas as law, accounting, loss
adjustment, assessment of environmental damage, and engineering. [FN429] Fifty-nine commissioners had been appointed as of April
2002 representing forty different nationalities. [FN430] Commissioners are selected by the Executive Secretary from
a register maintained by the Secretary-General, subject to approval by the
Governing Council. [FN431] Commissioners
sit in panels of three, each specializing in a particular type of claim. [FN432]
The composition of the Tribunal is less
apparently political than that of the UNCC, inasmuch as the work of the
Tribunal is not overseen by state representatives who have other diplomatic
functions.
The most satisfactory approach is to combine
features of the Tribunal and the International Chamber of Commerce
("ICC"). The Kosovo Claims "Tribunal" itself should
comprise seven members, two selected by the government of Serbia, two selected
by the government of Kosovo, two selected by the SRSG to represent the
interests of claimants and asset holders in other states, and one selected by the
Presiding Judge of the International Court of Justice. The Kosovo Claims
Tribunal would consider and accept, reject, or modify recommendations submitted
by commissioners, who would actually hear
claims. Commissioners would be assigned from a roster developed by the ICC. The
Kosovo Claims Tribunal would have the power to adopt rules of procedure.
Involvement by the International Court of
Justice and by the ICC is intended to link the Kosovo Claims Tribunal more
closely to the commercial community than might be the case if it were entirely
defined by political bodies of the U.N. The role of the governments of Kosovo
and Serbia would be less than in the case of the Iran-U.S. Claims Tribunal
because the Kosovo Claims Tribunal, unlike the Iran-U.S. Tribunal, will hear
claims involving nationals of third states.
[FNa1]. Professor of Law and former Dean, Chicago-Kent College of
Law, Illinois Institute of Technology. The author appreciates good research,
analysis, and drafting assistance from Brian Orr, Class of 2004, Chicago-Kent
College of Law. The author also appreciates attorney William Klawonn's legal
insights, including identifying for the author the importance of a claims
resolution mechanism to successful final status negotiations for Kosovo. The
author welcomes comments and suggestions on this Article. He may be contacted
at (312) 906-5098 or hperritt@kentlaw.edu.
[FN1]. Under U.N. Security Council Resolution 1244, Kosovo,
formerly an autonomous province of the
Republic of Serbia within Yugoslavia, is being administered by the U.N. as a
political trusteeship. See S.C. Res. 1244, U.N. SCOR, 54th Sess., 4011th mtg.,
U.N. Doc. S/RES/1244 (1999). See generally Henry H. Perritt, Jr., Structures
and Standards for Political Trusteeship, 8 UCLA J. Int'l L. & Foreign Aff.
385 (2003) (explaining the concept of political
trusteeship). Security Council Resolution 1244 requires the U.N. to facilitate
"a political process designed to determine Kosovo's future status."
S.C. Res. 1244, supra, P11(e).
[FN2]. See Paul Williams & Jennifer Harris, State
Succession to Debts and Assets: The Modern Law and Policy, 42 Harv. Int'l L.J.
355 (2001) (reviewing public international law on
state succession; analyzing how public international law has been affected by
the dissolutions of the Soviet Union, Yugoslavia, and Czechoslovakia; and
recommending approaches for the future).
[FN3]. See Yucyco,
Ltd. v. Republic of Slovenia, 984 F. Supp. 209, 217- 18 (S.D.N.Y. 1997) (distinguishing state succession from mere change in
government).
[FN4]. See Republic
of the Philippines v. Marcos, 806 F.2d 344, 352, 354 (2d Cir. 1986)
(affirming injunction against disposing of assets in the U.S. until the Philippines Commission can determine
whether they were bought with money misappropriated from the Philippines
Government and finding federal question jurisdiction because the court must
decide as a matter of federal law the effect to be given a foreign act of
state); Republic
of the Phillipines v. Marcos, 653 F. Supp. 494, 496 (S.D.N.Y. 1987) (appointing receiver over assets in U.S. allegedly bought
with money misappropriated from the Phillipines Government until legal
proceedings in the Phillipines can determine the merits).
[FN5]. Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (New
York Convention), June 10, 1958, 21 U.S.T. 2517,
330 U.N.T.S. 38. Most relevant states are parties to the New York Convention.
[FN6]. The acceptability of claims dispute resolution in the
courts of Serbia could be increased by the possibility of appealling decisions
in which the procedure failed to meet the standards of the European Convention
on Human Rights ("ECHR"). "Any person" has standing to
challenge in the European Court of Human Rights a decision by a court in a
state signatory to the ECHR. See Protocol No. 11 to the Convention for the
Protection of Human Rights and Fundamental Freedoms, Restructuring the Control
Machinery Established Thereby, Nov. 5, 1994, art. 34 Europ. T.S. No. 155. The
ECHR was signed by the Member States of the
Council of Europe, including Serbia and Montegro. Id. at 2; see also
http://www.coe.int/T/E/Com/About_Coe/Member_states/default.asp (last visited
Jan. 21, 2005) (listing Serbia-Montenegro as a Member State of the Council of
Europe).
[FN7]. See generally Council Regulation 44/2001 of 22 December
2000 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil
and Commercial Matters, 2001 O.J. (L 12) 1 (replacing Brussels and Lugano
Conventions).
[FN8]. Restatement
(Second) of Conflict of Laws § § 222-43
(1971).
[FN9]. Id. § 196 (contracts for the performance of services,
giving employment as example).
[FN10]. Id. § 187.
[FN11]. See Rome Convention of 1980 on the Law Applicable to
Contractual Obligations art. 4, 1998 O.J. (C 27) 34, 37 (applicable law in the
absence of choice). On January 14, 2003, the European Commission
("EC") adopted a Green Paper to launch a discussion about conversion
of the Rome Convention of 1980 into European
legislation harmonizing choice of law in contract disputes. Although the rules
of the Rome Convention are in force in all the member states, it still takes
the form of an international agreement rather than a community instrument
proper, and as such the Court of Justice of the European Communities has no
jurisdiction to interpret it. See Proposal Put Forward by European Commission,
at http://europa.eu.int/comm/justice_
home/fsj/civil/applicable_law/fsj_civil_applicable_law-_en.htm (last visited
Jan. 21, 2005).
[FN12]. See Restatement (Second) of Conflicts of Laws, supra note
8, § 6.
[FN13]. See generally Restatement
(Third) of Foreign Relations Law of the United States § 482 (1987) (noting some variation in whether choice of law by a foreign
court is the basis for nonrecognition of judgment of that court).
[FN14]. See Lawrence B. Low et al, Divisive Corporate
Reorganizations: Spin-offs and Subsidiary Public Offerings, in Lawrence
Lederman & Martin Nussbaum, Acquisitions in a Deleveraging Environment 125,
128-31 (PLI Handbook Series. No. B-787, 1992) (defining a "spin-off"
as occurring:
when a parent corporation forms a subsidiary
corporation, transfers certain of its assets to the subsidiary in exchange for
all of the subsidiary's stock and
distributes the subsidiary's stock to its own shareholders pro rata as a
dividend and/or sells stock in a public offering. Following a spin-off
reorganization, shareholders of the former parent corporation own stock in two
corporations which are brother-sister, rather than parent-subsidiary
corporations
and distinguishing "split-off" and
"split-up").
[FN15]. Professor Helmholz describes:
Joint tenancies and tenancies in common exist
where estates in land or rights to chattels are held as a unit by two or more
persons. The former are distinguished from the latter by the characteristic,
traditionally called the ius accrescendi, which makes the joint tenant who
survives the death of the other(s) the outright owner of all the property.
R.H. Helmholz, Realism
and Formalism in the Severance of Joint Tenancies, 77 Neb. L. Rev. 1, 4 (1998).
[FN16]. See Flood
v. Kalinyaprak, 84 P.3d 27, 32 (Mont. 2004). When
partitioning a tenancy in common, assets are presumed to be divided equally,
but evidence of unequal contribution requires property to be divided in
proportion to contribution. Id.
[FN17]. See Mellen
v. Moline Malleable Iron Works, 131 U.S. 352
(1889) (discussing basic characteristics
of equity receivership); David L. Abney, The Practitioner's Corner: Selling
Equity Receivership Property Free and Clear of Liens and Encumbrances, 16 Real
Est. L.J. 364 (1988) (providing an overview of
equity receiverships, citing authority, and noting the flexibility and power to
sell property free of liens and encumbrances, which must be asserted against
proceeds of the sale).
[FN18]. For example, a creditor of the enterprise would value a
debt from the enterprise at full value on the creditor's balance sheet. After
bankruptcy, the balance sheet of the creditor would show only the value of
whatever the creditor received in distribution of assets of the bankrupt.
[FN19]. See In
re Zell, 284 B.R. 569 (Bankr. D. Md. 2002)
(determining valuation method in Chapter 7 bankruptcy proceeding); Flanigan
v. Gen. Elec. Co., 93 F. Supp. 2d 236, 256 (D. Conn. 2000) (addressing valuation dispute in spin-off); Lance
v. Lance, 979 S.W.2d 245, 253 (Mo. Ct. App. 1998)
(reversing and remanding for valuation of assets involved in joint tenancy); In
re Estate of Daniels, 279 Cal. Rptr. 40, 42 (Cal. Ct. App. 1991) (reversing probate court decision because of error in
valuation).
[FN20]. See Williams
& Harris, supra note 2, at 360. Public international law, despite a long
history of dealing with treaty continuity and membership in international
organizations, gives scant precedent regarding state succession to debts and
assets, due in part to the relatively recent development of the international
financial system and arrangements for multilateral lending. Id.
[FN21]. See Marco A. Martins, An Alternative
Approach to the International Law of State Succession: Lex Naturae and the
Dissolution of Yugoslavia, 44 Syracuse L. Rev. 1019 (1993) (characterizing the history of the law of state succession
as rooted in decolonization).
[FN22]. See Vienna
Convention on Succession of States in Respect of State Property, Archives and
Debts, Apr. 8, 1983, 22 I.L.M. 306, available at
http:// www.un.org/law/ilc/texts/tresufra.htm [hereinafter 1983 Vienna
Convention].
[FN23]. See Yucyco,
Ltd. v. Republic of Slovenia, 984 F. Supp. 209, 217- 18 (S.D.N.Y. 1997) (observing that, absent acceptance, a successor state is
not bound by contracts executed by a former sovereign, and rejecting a claim to
equitable apportionment as a nonjusticiable political question).
[FN24]. See Williams
& Harris, supra note 2, at 361. The 1983 Vienna Convention did not
distinguish between national and territorial debt, but it did distinguish
between national and territorial assets. Territorial assets are those things,
such as power plants, manufacturing enterprises, and mineral deposits that are
linked to the physical territory of a particular successor state. National
assets are "held by the former central government, and include things such
as currency accounts, federal movable property, gold reserves, and diplomatic
and state property located abroad." Id.
[FN25]. Id. at 357. Equitable allocation can be defined in terms
of gross national product, natural resources, territory, population, or some
combination, but the main issue is whether a successor state's share of assets
is the same as its share of debts. Id.
[FN26]. Id. at 362.
[FN27]. Id.
[FN28]. Id. at 364.
[FN29]. See id. at 388. On July 4, 1992, the EC Arbitration
Commission found that the Socialist Federal
Republic of Yugoslavia ("SFRY") should be considered to have
dissolved and that the Federal Republic of Yugoslavia ("FRY") could
not be considered the continuity of the SFRY. Id.
[FN30]. Id. at 364.
[FN31]. Id. Whether third-party states were obligated to
recognize successor state claims to assets depended on whether third-party
states had recognized successor states as sovereign. Id.
[FN32]. See id. at 357. The three most important categories of
norms relate to the identification of national, territorial, and identifiable
debt, the principle of pacta sunt servanda, and the principle of equitable
allocation. Id.
[FN33]. 1983 Vienna Convention, supra note 22, at art. 8.
[FN34]. Id. at art. 33.
[FN35]. See Williams & Harris, supra note 2, at 366. The 1983
Vienna Convention creates no obligation of third-party states to protect assets
of predecessor states during the breakup or
to assist successor states in obtaining equitable shares of either territorial
or national property. Id. Serbia-Montenegro was able to seize most of the
national assets of the former Yugoslavia. Id. at 399. The eventual freeze of
assets of the former Yugoslavia occurred after most were dissipated in order to
finance Serbia's armed conflict in Croatia and Bosnia. Id.
[FN36]. Id. at 407.
[FN37]. Id. at 408.
[FN38]. Id. at 412.
[FN39]. Id. (noting, however, that this approach may be less
adapted to dissolution of states with centrally controlled economies because of
the lack of third-party access to data).
[FN40]. The Paris Club is a voluntary collection of official
creditors (such as states and state central banks) who work to reschedule debt
of distressed states. See Paris Club, Description of the Paris Club, at http://
www.clubdeparis.org/en/presentation/presentation.php?BATCH=B01WP01 (last visited Jan. 21, 2005).
[FN41]. The London Club is an informal group of commercial banks
who work to reschedule or forgive debt of distressed states. See Steven L.
Schwarcz, Sovereign
Debt Restructuring: A Bankruptcy Reorganization Approach, 85 Cornell L. Rev.
956, 960 n.15 (2000) (summarily explaining the
nature of the London Club).
[FN42]. See infra Part III(B)(1).
[FN43]. See infra Part I(C).
[FN44]. The European Community ("EC") created the EC
Arbitration Commission in 1991 to assist in negotiating a settlement to the
Yugoslav conflict. See Williams & Harris, supra note 2, at 385-86.
[FN45]. Id. at 390 (indicating that Serbia refused to participate
meaningfully in the Working Group on Economic Issues established by the
International Peace Conference because it insisted that assets include all
property possessed by former republics, all public property, all property
belonging to associated labor organizations, and all property financed by more than one republic).
[FN46]. Id. at 388 (noting "there was little pressure by
creditor states to reach an agreement on the allocation of the debts or
assets" because Yugoslavia did not have a substantial amount of external
debt other than debt to international financial institutions).
[FN47]. See id. at 406.
[FN48]. Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States, Mar. 18, 1965, 575 U.N.T.S. 159, 17
U.S.T. 1270, available at
http://www.worldbank.org/-icsid/basicdoc/partA.htm.
[FN49]. See, e.g., Tradex Hellas S.A. (Greece) v. Republic of
Albania, Award, ICSID Case No. ARB/94/2, 14 ICSID Rev.-For. Inv. L.J. 197
(1999), available at http://www.worldbank.org/-icsid/cases/tradex_award.pdf
(last visited Jan. 22, 2005) (arbitration award by the ICSID on an unsuccessful
claim by a Greek company against the state of Albania for expropriation of a
farming venture).
[FN50]. See Verlinden
B.V. v. Cent. Bank of Nig., 461 U.S. 480, 486-89 (1983) (reviewing the history of sovereign immunity); see id.
at 490-91, 497 (holding that federal courts could
exercise jurisdiction over breach of contract claims against state banks under
the Foreign Sovereign Immunities Act ("FSIA"), and that the FSIA did
not violate Article III of the U.S. Constitution).
[FN51]. See discussion infra Part II(C)(2).
[FN52]. See discussion infra Part II(C)(3).
[FN53]. The Schooner
Exchange v. McFaddon, 11 U.S. (7 Cranch) 116, 146 (1812) (the
immunity of one sovereign to the exercise of judicial power over it by another
is inherent in the concept of sovereignty).
[FN54]. Paul L. Lee, Central
Banks and Sovereign Immunity, 41 Colum. J. Transnat'l L. 327, 333 (2003).
[FN55]. Id.
[FN56]. Id.
[FN57]. See Abrams
v. Société Nationale des Chemins de Fer Français, 175 F. Supp. 2d 423, 427
(E.D.N.Y. 2001) ("Moreover, the principle is
regularly applied in suits against the United States in foreign courts."),
vacated, 332
F.3d 173 (2d Cir. 2003) (questioning
constitutionality of giving retroactive effect to FSIA), vacated, 124
S. Ct. 2834 (2004) (retroactive effect not
unconstitutional).
[FN58]. Lee, supra note 54, at 334. The FSIA "was designed
to codify the restrictive theory of sovereign immunity and to remove the
subject from diplomatic pressures by transferring... decisions [about sovereign
immunity] to the judiciary." Abrams,
332 F.3d at 178.
[FN59]. 28
U.S.C. § 1605(a)(2) (2000).
[FN60]. See Lee, supra note 54 (reviewing application of the FSIA
to foreign central banks as defendants).
[FN61]. Insolvency is a "financial condition such that the
sum of such entity's debts is greater than all of such entity's property, at a
fair valuation." 11
U.S.C. § 101(32)(A) (2000) (defining
"insolvent"); see also Draft Legislative Guide on Insolvency Law,
United Nations Commission on International
Trade Law (UNCITRAL) Working Group V (Insolvency), 30th Sess., at 6, U.N. Doc.
A/CN.9/WG.V/WP.70 (Part I) (2003) (defining "insolvency" as
"[w]hen the debtor is generally unable to pay its debts as they mature or
when its liabilities exceed the value of its assets"), available at
http:// www.uncitral.org/en-index.htm [hereinafter UNCITRAL Draft Legislative
Guide Part I].
[FN62]. Black's Law Dictionary 141 (7th ed. 1999).
[FN63]. See 11
U.S.C. § § 1101-74 (2000) (reorganization);
UNCITRAL Draft Legislative Guide Part I, supra note 61, at 8 (defining
reorganization as the "[p]rocess by which the financial well-being and
viability of a debtor's business can be restored and the business continue to
operate, using various means possibly including debt forgiveness, debt
rescheduling, debt-equity conversions and sale of the business (or parts of it)
as a going concern").
[FN64]. See 11
U.S.C. § § 701-84 (liquidation); UNCITRAL Draft
Legislative Guide Part I, supra note 61, at 7 (defining liquidation as
"[p]roceedings to assemble and reduce the debtor's assets to money for
distribution in accordance with the insolvency law").
[FN65]. Richard L.
Koral & Marie-Christine Sordino, The New
Bankruptcy Reorganization Law in France: Ten Years Later, 70 Am. Bankr. L.J.
437, 442 (1996).
[FN67]. See id.
at 442.
[FN68]. See id.
at 448.
[FN69]. Karen M. Gebbia-Pinetti, First
Report of the Select Advisory Committee on Business Reorganization, 57 Bus.
Law. 163, 174-75 n.7 (2001).
[FN70]. Eberhard Schollmeyer, The New
European Convention on International Insolvency, 13 Bankr. Dev. J. 421, 421,
422 (1997).
[FN72]. Id.
[FN73]. Id. at 435.
[FN74]. Id. at 437-38.
[FN75]. See UNICITRAL Draft Legislative Guide Part I, supra note
61; Draft Legislative Guide on Insolvency Law, United Nations Commission on
International Trade Law (UNCITRAL) Working Group V (Insolvency), 30th Sess.,
U.N. Doc. A/CN.9/WG.V/WP.70 (Part II) (2003), available at
http://www.uncitral.org/en-index.htm [hereinafter UNCITRAL Draft Legislative
Guide Part II].
[FN76]. See Report of Working Group V (Insolvency Law) on the
Work of its Twenty-ninth Session, 37th Sess., P11, U.N. Doc. A/CN.9/542 (2003),
available at http://www.uncitral.org/en-index.htm (summarizing the work
culminating in UNCITRAL adopting the Draft Legislative Guide on Insolvency Law)
[hereinafter 2003 UNCITRAL Report].
[FN77]. Id. P2 (noting the difficulty in harmonizing bankruptcy
law).
[FN78]. Draft Legislative Guide on Insolvency Law Part II, supra
note 75, PP88-90 (suggesting that SOEs be subjected to general bankruptcy law,
with certain exceptions, such as state guarantees).
[FN79]. See generally
Michael T. Hilgers, Debtor-States
and an International Bankruptcy Court: The IMF Creditor Problem, 4 Chi. J.
Int'l L. 257 (2003) (evaluating and criticizing
the International Monetary Fund's ("IMF") proposal for an
international bankruptcy court to deal with private and intergovernmental
claims against insolvent states).
[FN80]. Several commentators, however, have suggested that
universalism will not work. See Frederick Tung, Is International
Bankruptcy Possible?, 23 Mich. J. Int'l L. 31 (2001) (questioning the feasibility of the "universalist" approach
to international bankruptcy); Frederick Tung, Fear
of Commitment in International Bankruptcy, 33 Geo. Wash. Int'l L. Rev. 555
(2001) (same). But see Andrew T. Guzman, International
Bankruptcy: In Defense of Universalism, 98 Mich. L. Rev. 2177 (2000) (defending universalism in the case of nonadjusting
creditors).
[FN81]. See Lynn M. LoPucki, Cooperation
in International Bankruptcy: A Post-Universalist Approach, 84 Cornell L. Rev.
696 (1999) (arguing for a system of cooperative
territoriality as the most feasible approach to international bankruptcies).
[FN82]. Model Law on Cross-Border Insolvency with Guide to
Enactment, U.N. Commission on International
Trade Law (UNCITRAL), arts. 15-24, U.N. Sales Doc. E.99.V.3 (1997), available
at http:// www.uncitral.org/english/texts/insolven/insolvency.htm.
[FN83]. See Craig R. Giesze, Helms-Burton
in Light of the Common Law and Civil Law Legal Traditions: Is Legal Analysis
Alone Sufficient to Settle Controversies Arising Under International Law on the
Eve of the Second Summit of the Americas?, 32 Int'l Law. 51, 74 n.127 (1998) (citing Black's Law Dictionary, French judicial precedent,
and foreign-state constitutional provisions for definitions of nationalization
and expropriation).
[FN84]. See Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 437 (1964).
[FN85]. Id.
at 406-07 (describing the procedural history of
the dispute).
[FN86]. Id.
[FN87]. Id. at 439.
[FN88]. Id. at 412.
[FN89]. Id. at 439.
[FN90]. Id. at 416.
[FN91]. Id.
[FN92]. Id. at 438.
[FN93]. See Peter T. Muchlinski, The Rise
and Fall of the Multilateral Agreement on Investment: Where Now?, 34 Int'l Law.
1033, 1050-53 (2000) (reviewing the history and
political context for negotiating investment-protection agreements).
[FN94]. See Jessica S. Wiltse, Comment, An Investor-State
Dispute Mechanism in the Free Trade Area of the Americas: Lessons from NAFTA
Chapter Eleven, 51 Buff. L. Rev. 1145, 1151 (2003)
(referring to MAI negotiations as "failed"); see also Kevin C.
Kennedy, A
WTO Agreement on Investment: A Solution in Search of a Problem?, 24 U. Pa. J.
Int'l Econ. L. 77, 83-84 (2003) (questioning the
need for a multilateral agreement on investment because market forces are
sufficient to encourage foreign direct investment).
[FN95]. See Christopher
Chamberlain, Bank Info. Ctr., The Role of World Bank Group in the Multilateral
Agreement on Investment Negotiations and Administration (Jan. 12, 1998), at
http://www.bicusa.org/bicusa/issues/misc_ resources/461.php.
[FN96]. See Andreas F. Lowenfeld, Investment
Agreements and International Law, 42 Colum. J. Transnat'l L. 123, 125 (2003) (evaluating the failure of efforts to negotiate
multilateral investment treaties and observing that thousands of bilateral
investment treaties are in force).
[FN97]. But see Talenti
v. Clinton, 102 F.3d 573, 578 (D.C. Cir. 1996) (private citizen lacked standing to compel
enforcement of the Hickenlooper Amendment to the Foreign Assistance Act, 22
U.S.C. § 2370(e)(1), superseded by the Helms Amendment,
22
U.S.C. § 2370(a)(1), against Italy for the
alleged expropriation of plaintiff's property); Betteroads
Asphalt Corp. v. United States, 106 F. Supp. 2d 262, 267-69 (D.P.R. 2000) (private creditor lacks standing to compel enforcement of
rarely enforced statutes authorizing the President to suspend foreign
assistance to any foreign state that blocks payment of claims by a U.S. private
entity).
[FN98]. See Guillermo
Aguilar Alvarez & William W. Park, The New
Face of Investment Arbitration: NAFTA Chapter 11, 28 Yale J. Int'l L. 365
(2003) (evaluating NAFTA Chapter 11 and analyzing
the legal bases for enforcing arbitration decisions on Chapter 11); Wiltse,
supra note 94, at 1147-51 (evaluating the desirability and feasibility of
extending the concepts of private-investor access to arbitration against states
in investment disputes); Lydia Lazar, NAFTA: Structural Damage to the Ship of
State?, in 2001 Employment Law Update 169 (Henry H. Perritt, Jr. ed., 2001)
(arguing that NAFTA's dispute resolution process diminishes notions of state
sovereignty).
[FN99]. See George Chifor, Caveat
Emptor: Developing International Disciplines for Deterring Third Party Investment
in Unlawfully Expropriated Property, 33 Law & Pol'y Int'l Bus. 179, 185
(2002) (widespread seizure of foreign-owned
property may return as a phenomenon associated with privatization); Amy L.
Chua, The Privatization-Nationalization
Cycle: The Link Between Markets and Ethnicity in Developing Countries, 95
Colum. L. Rev. 223 (1995) (describing historical
and likely future cycles).
[FN100]. The approach of the Kosovo Trust Agency ("KTA")
is a good example. See Kosovo Trust Agency, Objectives of the Kosovo Trust
Agency, at http://
www.kta-kosovo.org/html/index.php?module=htmlpages&func=display&pid=1
(last visited Jan. 22, 2005) (explaining
the spin-off approach to privatization). The reorganization of the northeast
and midwest railroads in the U.S. is another example, albeit not involving
foreign investors. See Regional
Rail Reorganization Cases, 419 U.S. 102, 111 (1974)
(describing the framework for reorganization, requiring owners of rail assets
to accept securities in new government-created corporations in exchange for
rail properties). The process represented nationalization of rail assets
contemporaneous with privatization. Conrail subsequently was financially
successful, able to sell securities in private capital markets and to pay off
its obligations to the federal government. See Christian C. Day, Corporate
Governance, Conrail, and the Market: Getting on the Right Track!, 26
J. Corp. L. 1, 3-4 (2000) (describing the
financial success of Conrail, leading to public offering and subsequent
purchase by other railroads). The previous owners of the rail properties were
required to present any claims for deficiency in payments to them before the
U.S. Claims Court. Absent such a remedy, the Supreme Court held the takings of
private property might raise serious constitutional questions. Regional
Rail Reorganization Cases, 419 U.S. at 148-49.
[FN101]. 719
A.2d 172, 177 (N.J. Sup. Ct. 1998).
[FN102]. 296
F.3d 1154, 1164 (D.C. Cir. 2002). The court held
that the state of Kazakhstan and its
instrumentalities enjoyed immunity under the FSIA and had not waived it. Id.
The lawsuit alleged that the contracts were not performed because of certain
decisions reached in the Kazakhstan privatization process. Id. at 1157-59. The
plaintiff did not assert the commercial activities exception. Id. at 1161. The
court held that certain of the defendants were entitled to FSIA immunity and
that immunity had been waived only for certain claims that nevertheless fell
within the act of state doctrine. Id. at 1156-57. As to claims against a
private corporation that allegedly interfered with the plaintiff's contracts,
the court remanded for a determination whether jurisdiction existed based on an
alleged meeting in the U.S. involving that private defendant. Id. at 1169.
[FN103]. In WMW Machinery, Inc. v. Werkzeugmaschinenhandel GMBH,
the district court held that the German privatization agency (the Treuhand) was
not entitled to sovereign immunity because the privatization agency, though an
entity of the state of Germany, fell within the commercial activities
exception. 960
F. Supp. 734, 741 (S.D.N.Y. 1997). WMW Machinery
sued the Treuhand as an owner of the German enterprise with which it
contracted. Id.
at 736. The contract at issue in WMW Machinery
(an exclusive distribution agreement) was to be performed wholly in the United
States and Canada. Id. at 737. The Treuhand allegedly ratified the contract at
issue and assured WMW that the contract was
still valid. Id. WMW Machinery could be decided by reference only to primarily
commercial decisions by the Treuhand. "The actions that form the basis of
plaintiffs' claims reflect an exercise of powers... akin to those that a
controlling stockholder of a corporation might take as a player in the private
market." Id. at 740 (internal quotation marks and citations omitted).
Compare
Dar-El-Bina Eng'g & Contracting Co., Ltd. v. Republic of Iraq, 79 F. Supp.
2d 374, 382 (S.D.N.Y. 2000) (dismissing claim for
nonpayment of commercial obligation as falling outside the commercial
activities exception of the FSIA because there is no obligation to make payment
in the U.S.) with Weltover,
Inc. v. Republic of Argentina, 753 F. Supp. 1201, 1207 (S.D.N.Y. 1991) (holding that the nonpayment of debt in the U.S. was
sufficient to satisfy the direct effect requirement of the FSIA commercial
activities exception), aff'd, 941
F.2d 145, 153 (2d Cir. 1991) (emphasizing payment
in New York as factual consideration in finding direct effect), aff'd on other
grounds, 504
U.S. 607, 619 (1992) (holding that Argentina's
act of diminishing New York's status as a "financial leader" was
insufficient to satisfy the direct effects test, but that contract performance
in New York was sufficient).
In Ampac Group, Inc. v. Republic of Honduras,
the district court found subject matter jurisdiction under the commercial
activities exception to the FSIA, rejecting
the defendants' arguments that "privatizing a national cement industry is
an action that could only be taken by a foreign sovereign and is thus not
'commercial activity"' and that privatization is "merely the 'flip
side' of nationalization, a quintessentially sovereign prerogative." 797
F. Supp. 973, 976, 977 (S.D. Fla. 1992). The
district court also rejected the argument that the act of state doctrine applied
to the "unquestionably commercial" privatization decisions by the
government of Honduras. Id.
at 978. The court also found personal
jurisdiction based on meetings held by Honduran officials in the U.S. Id.
at 979.
[FN104]. Id.
at 976 (emphasis added).
[FN105]. Id.
[FN106]. See generally Abigail Hing Wen, Suing
the Sovereign's Servant: The Implications of Privatization for the Scope of
Foreign Sovereign Immunities, 103 Colum. L. Rev. 1538 (2003) (proposing an amendment to the FSIA to extend the immunity
to private entities performing public functions).
[FN107]. See Underhill
v. Hernandez, 168 U.S. 250, 252 (1897) (courts of
one country must not sit in judgment on acts of another government). When a U.S. federal court has jurisdiction over a
claim, the act of state doctrine obliges the court to accept the acts of the
foreign sovereign as valid. The policies supporting the doctrine center around
notions of international comity, separation of powers, and a desire to avoid
embarrassing the Executive Branch in its conduct of foreign relations. See World
Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165 (D.C. Cir.
2002). Because of these policy considerations and
because ruling on the validity of acts by foreign sovereigns uncomfortably
approaches the political question doctrine, courts routinely avoid ruling on
the validity of acts by foreign sovereigns. See Alfred
Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 727 (1976) (Marshall, J., dissenting) (ruling on foreign acts of state
approaches nonjusticiable political questions in federal courts); Baker
v. Carr, 369 U.S. 186, 211-12 (1962) (questions
involving foreign relations would require the judiciary to exercise discretion
committed to the Executive); Restatement (Third) of the Foreign Relations Law
of the United States, supra note 13, § 1, rptrs. n.4 (discussing the issues
courts have held to be nonjusticiable political questions).
The act of state doctrine is a widely applied
common law doctrine of judicial decision making, rather than a statutory
command. See Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427 (1964); Ricaud
v. Am. Metal Co., 246 U.S. 304, 310 (1918). In
W.S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Int'l, the Supreme Court stated that
"[a]ct 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." 493
U.S. 400, 406 (1990) (emphasis in original).
[FN108]. World
Wide Minerals, 296 F.3d at 1157.
[FN109]. See, e.g., Ana Stanic, Financial Aspects of State
Succession: The Case of Yugoslavia, 12 Eur. J. Int'l L. 751 (2001) (reviewing
negotiations over Yugoslav succession and analyzing agreements reached with the
IMF, the World Bank, and the London and Paris Clubs); Mojmir Mrak,
Apportionment and Succession of External Debts: The Case of the Socialist
Federal Republic of Yugoslavia (Vienna Inst. Int'l Econ. Studs. No. 259, 1999).
[FN110]. See Williams & Harris, supra note 2, at 392-94 (the
European Community Arbitration Commission essentially punted on questions
presented to it about state succession to debts and assets).
[FN111]. See Stanic, supra note109, at 758 (quantifying total debt
at $15.99 billion, with $3.79 billion unallocated and $12.2 billion allocated).
[FN112]. See Mrak,
supra note 109, at 3.
[FN113]. Id. at 4.
[FN114]. Id. at 13. More than $1.3 billion of this was for project
loans, with clearly identifiable beneficiaries in individual republics of
former Yugoslavia. Id.
[FN115]. See Stanic, supra note 109, at 755.
[FN116]. Mrak, supra note 109, at 8-9 (describing institutional
mechanisms for negotiations over succession).
[FN117]. See Stanic, supra note 109, at 754.
[FN118]. See Mrak, supra note 109, at 11 (discussing the Badinter
Commission's Opinions 1 & 8, U.N. Security Council Resolutions 757 and 777,
and noting the 1992 decision by the IMF and the 1993 decision by the World
Bank).
[FN119]. Austria:
Supreme Court Decision in Republic of Croatia et al. v. Girocredit Bank A.G.
der Sparkassen, Dec. 17, 1996, 36 I.L.M. 1520, 1529.
[FN120]. Stanic, supra
note 109, at 755. Stanic concluded that, "[c]learly, the FRY should
account to the four successor states for these assets. Their actual division,
however, is no longer possible as they have either been spent, or in case of
military assets are destroyed or obsolete." Id. at 771.
[FN121]. Id. at 757-58.
[FN122]. Id. at 762. "Connected persons" were persons
who had purchased Yugoslav debt on secondary markets at a discount, allegedly
with assets belonging to Yugoslavia. Id.
[FN123]. See id. at 764 (describing the dispute over whether
socially-owned property constituted "state property").
[FN124]. See Mrak, supra note 109, at 11; Stanic, supra note 109,
at 752.
[FN125]. See Mrak, supra note 109, at 6 (noting the practice of
assigning allocated debt to the beneficiary successor state); id. at 10
(reporting the adoption of principles for Yugoslav succession by the World
Bank).
[FN126]. See id. The
apportionment of nonallocated debt was calculated as follows: Serbia-Montegro:
36.52%; Croatia: 28.49%; Slovenia: 16.39%; Bosnia and Herzegovina: 13.2%; and
Macedonia: 5.4%. Id. The IMF "key" was determined based on economic
criteria such as the republics' contributions to the federal budget, their
share in social product and export earnings, and their percentage of
Yugoslavia's population and territory. Stanic, supra note 109, at 759.
[FN127]. .See Agreeement
on Succession Issues Between the Five Successor States of the Former State of
Yugoslavia, June 29, 2001, 41 I.L.M. 1, 1
(Introductory Note by Sir Author Watts) [hereinafter Agreement on Succession
Issues]. One successor state, the FRY, had not yet concluded any agreements
regarding its share of debt liability and was required to assume responsibility
for its allocated debt to Paris Club and London Club creditors and for its
unallocated debt to such creditors. See id. at annex C, art. 3(2); see also
Williams & Harris, supra note 2, at 397 (noting that the Paris Club,
prodded by Germany, took main responsibility for allocating debt of the former
Yugoslavia).
[FN128]. See Mrak, supra note 109, at 17 (noting the London Club's
deviations from the IMF's calculated percentages).
[FN129]. Stanic, supra
note 109, at 753 (reporting the FRY's concession that the SFRY has dissolved).
[FN130]. .See id. at 779 (noting agreement using IMF key);
Agreement on Succession Issues, supra note 127, at 2. The five successor states
included: Slovenia, Croatia, Macedonia, Bosnia and Herzegovina, and the FRY
(comprised of the provinces of Serbia, Montenegro, Kosovo, and Vojvodina). See
id. at 1.
[FN131]. .See id. at 2.
[FN132]. .See id. at Annex C, arts. 4, 5. The distributed assets
included the former Yugoslavia's funds at the Yugoslav Bank for International
Economic Co-operation and foreign financial assets. See id.
[FN133]. Id. at Annex A, art. 2(1).
[FN134]. .Id. at Annex A, art. 3(1). Movable property is not
transferred to the successor state if the property is of great cultural
importance to another successor state and the property originated from that
state. Id. at Annex A, art. 3(2).
[FN135]. .Id. at art.
4(1)-(2). The rules of procedure were left to the joint committee to establish
itself. Id. at art. 4(4).
[FN136]. .Id. at art. 5(1).
[FN137]. .Id. at art. 5(2)(a)-(b).
[FN138]. Id. at art. 12(1).
[FN139]. Slovenia and NATO, Political Issues, at http://
nato.gov.si/eng/topic/ratification/time-table/political-economic/ (last visited
Jan. 22, 2005).
[FN140]. Croation Notifiies U.N. on Ratification of Succession
Agreement, BBC Monitoring Int'l Reps., May 4, 2004, available in LexisNexis
AllNews database and on file with the Chicago-Kent Law Review.
[FN141]. Williams & Harris, supra note 2, at 369.
[FN142]. Id. at 376-83.
[FN143]. Ariel Cohen
& Gerald P. O'Driscoll, Jr., The Road to Economic Prosperity for a
Post-Saddam Iraq 9 (Heritage Found. Backgrounder No. 1633, 2003), available at
http://www.heritage.org/Research/MiddleEast/loader.cfm? url=/commonspot/security/getfile.cfm&PageID=37452;
Energy Information Administration, Russia, at
www.eia.doe.gov/emeu/pgem/ch4a.html.
[FN144]. Energy Information Administration, supra note 143.
[FN145]. .Id.
[FN146]. Cohen & O'Driscoll, supra note 143, at 9. Privatized
oil companies expanded production and exports, while government-run companies
have not expanded as rapidly. See id. Privatized companies also have been more
successful than government-run companies at attracting foreign investment. Id.
[FN147]. Energy Information Administration, supra note 143.
[FN148]. Cohen & O'Driscoll, supra note 143, at 9. Large banks
and industrial groups have become the major players in the sale of shares in
Russian state-run companies. Henry Gibbon, Mass Privatisation Nearly Completed,
Financial News, May 25, 1998.
[FN149]. Cohen & Driscoll, supra note 143, at 9.
[FN150]. Williams & Harris, supra note 2, at 401 (citations
omitted).
[FN151]. Thomas Fuller, A 'Bad Situation' is Looking a Lot Better;
The New Europe: Czech Republic, Int'l Herald Trib. (Paris), Oct. 20, 2003, at
10.
[FN152]. Keith Dovkants, A Most Impeccable Crook, Evening Standard
(London), Oct. 23, 2002, at 16.
[FN153]. See William Megginson, Privatization, 118 Foreign Pol'y
14, 24 (2000).
[FN154]. .See Dovkants, supra note 152, at 16.
[FN155]. .See id.
[FN156]. Nick Carey, Pirate of Prague Indicted for Fraud in U.S.,
Prague Bus. J., Oct. 6, 2003. Kozeny later tried a similar scheme in
Azerbaijan. See Dovkant, supra note 152, at
16. Kozeny collected money to purchase privitization vouchers from the
Azerbaijan government. Id. The vouchers were to be used to purchase shares in
the state oil industry, but the Azerbaijan government would not sell shares of
the state oil industry to foreigners. Id. Kozeny was later accused of using the
money for his personal expenses. See Carey, supra.
[FN157]. Jackson
v. People's Republic of China, 550 F. Supp. 869, 871-72 (N.D.Ala. 1982)
(holding the People's Republic of China liable as successor government for
bonds issued by the Imperial Chinese government in 1911), aff'd on other
grounds, 794
F.2d 1490 (11th Cir. 1986).
[FN158]. United
States v. Nat'l City Bank of N.Y., 90 F. Supp. 448, 452 (S.D.N.Y. 1950)
(finding that the Bolshevik Revolution of 1917 did not amount to state
succession).
[FN159]. Kunstsammlungen
Zu Weimar v. Elicofon, 536 F. Supp. 829, 853, 857 (E.D.N.Y. 1981) (holding that the German Democratic Republic was entitled
to possession of stolen paintings as successor government to the Third Reich),
aff'd, 678
F.2d 1150 (2d Cir. 1982).
[FN160]. See, e.g., Trans-Orient
Marine Corp. v. Star Trading & Marine, Inc., 731 F. Supp. 619, 623
(S.D.N.Y. 1990) The court wrote:
The military coups of 1985 and 1989 did not
effect a succession of state of the Sudan but merely changed the state's
governing body, leaving the state's obligations undisturbed.... [T]he rights
and liabilities of a state are unaffected by a change either in the form or
personnel of its government, however accomplished, whether by revolution or
otherwise. No other doctrine is thinkable, at least among nations which have
any conception of international honor.
Id. (internal quotations and citations
omitted).
[FN161]. See generally Iran-United States Claims Tribunal, at
http:// www.iusct.org/index-english.html (last visited Jan. 24, 2005).
[FN162]. Declaration of the Government of the Democratic and
Popular Republic of Algeria Concerning the Settlement of Claims by the
Government of the United States of America and the Government of the Islamic
Republic of Iran (Claims Settlement Declaration), art. II, P1 (Jan. 19, 1981),
at http:// www.iusct.org/claims-settlement.pdf [hereinafter Claims Agreement].
[FN163]. See Iran-United States Claims Tribumnal, Background
Information, at http://www.iusct.-org/background-english.html
(last visited Jan. 24, 2005).
[FN164]. Id. The Tribunal Agreement gives it jurisdiction over:
1. [C]laims of nationals of the United States
against Iran and claims of nationals of Iran against the United States, and any
counterclaim which arises out of the same contract, transaction or occurrence
that constitutes the subject matter of that national's claim, if such claims
and counterclaims are outstanding on the date of this Agreement, whether or not
filed with any court, and arise out of debts, contracts (including transactions
which are the subject of letters of credit or bank guarantees), expropriations
or other measures affecting property rights, excluding claims described in
Paragraph 11 of the Declaration of the Government of Algeria of January 19,
1981, and claims arising out of the actions of the United States in response to
the conduct described in such paragraph, and excluding claims arising under a
binding contract between the parties specifically providing that any disputes
thereunder shall be within the sole jurisdiction of the competent Iranian
courts, in response to the Majlis position.
2. The Tribunal shall also have jurisdiction
over official claims of the United States and Iran against each other arising
out of contractual arrangements between them for the purchase and sale of goods
and services.
3. The Tribunal shall have jurisdiction, as
specified in Paragraphs 16-17 of the
Declaration of the Government of Algeria of January 19, 1981, over any dispute
as to the interpretation or performance of any provision of that Declaration.
Claims Agreement, supra note 162, at art. II.
[FN165]. See Riahi v. Gov't of the Islamic Republic of Iran, Award
No. ITL 80-485-1, 28 Iran-U.S. Cl. Trib. Rep. 176 (1992).
[FN166]. Nancy Combs et al, International
Courts and Tribunals, 37 Int'l Law. 523, 537
(describing case).
[FN167]. Iran-United States Claims Tribunal, supra note 163.
[FN168]. Id.
[FN169]. Id.
[FN170]. Id.
[FN171]. Communiqué from the Office of the Secretary-General of
the Iran-United States Claims Tribunal (Jan. 20, 2004), at http:// www.iusct.org/communique-english.pdf.
[FN172]. See generally United Nations Compensation Commission, at
http:// www.unog.ch/uncc (last visited Jan. 24, 2005).
[FN173]. See Report of Secretary-General Pursuant to Paragraph 19
of Security Council Resolution 687, PP1-2, U.N. Doc. S/22559 (1991), available
at http://www.unog.ch/uncc/resolutio/res22559.pdf (finding Iraq responsible for
damages occasioned by the invasion of Iraq, and directing the Secretary-General
to develop recommendations for a compensation fund and a commission to
administer it); id. P4 (noting that the UNCC must determine the level of
contribution to the U.N. Compensation Fund, allocate funds and payments of claims,
evaluate losses, list claims and verify their validity, and resolve disputed
claims); S.C. Res. 692, U.N. SCOR, 2987th mtg. P3, U.N. Doc. S/RES/692 (1991)
(establishing the UNCC and U.N. Compensation Fund); S.C. Res. 705, U.N. SCOR,
3004th mtg. P2, U.N. Doc. S/RES/705 (1991) (adopting the recommendation by the
Secretary-General to satisfy claims through a Compensation Fund, financed by up
to 30% of the value of Iraq's exports of petroleum and petroleum products).
[FN174]. S.C. Res. 1330, U.N. SCOR, 4241st mtg. P12, U.N. Doc.
S/RES/1330 (2000).
[FN175]. U.N. Compensation Commission Governing Council,
Provisional Rules for Claims Procedure, art. 5, 6th Sess., U.N. Doc.
S/AC.26/1992/10 (1992), available at
http://www.unog.ch/uncc/dec-ision/dec_10.pdf.
[FN176]. Id.
[FN177]. See U.N. Compensation Commission, The Claims, at http://
www.unog.ch/uncc/theclaims.htm (last visited Jan. 24, 2005) (describing
Category "C," "D," and "E" claims).
[FN178]. Id.
[FN179]. U.N. Compensation Commision, Status of Claims Processing
(Oct. 27, 2004), at http://www.unog.ch/uncc/status.htm.
[FN180]. See S.C. Res. 1483, U.N. SCOR, 4761st mtg. P21, U.N. Doc.
S/RES/1483 (2003) (making funding requirements binding on ultimate government
of Iraq and any successor).
[FN181]. Resolution
1483 reads:
[The Security Countil decides that]
petroleum, petroleum products, and natural gas originating in Iraq shall be
immune, until title passes to the initial purchaser from legal proceedings
against them and not be subject to any form of attachment, garnishment, or
execution, and that all States shall take any steps that may be necessary under
their respective domestic legal systems to assure this protection, and that
proceeds and obligations arising from sales thereof, as well as the Development
Fund for Iraq, shall enjoy privileges and immunities equivalent to those
enjoyed by the United Nations except that the abovementioned privileges and
immunities will not apply with respect to any legal proceeding in which recourse
to such proceeds or obligations is necessary to satisfy liability for damages
assessed in connection with an ecological accident, including an oil spill,
that occurs after the date of adoption of this resolution;
Decides that all Member States in which there
are:
a) funds or other financial assets or
economic resources of the previous Government of Iraq or its state bodies,
corporations, or agencies, located outside Iraq as of the date of this
resolution, or
b) funds or other financial assets or
economic resources that have been removed from Iraq, or acquired, by Saddam
Hussein or other senior officials of the former Iraqi regime and their
immediate family members, including entities owned
or controlled, directly or indirectly, by them or by persons acting on their
behalf or at their direction,
shall freeze without delay those funds or
other financial assets or economic resources and, unless these funds or other
financial assets or economic resources are themselves the subject of a prior
judicial, administrative, or arbitral lien or judgement, immediately shall
cause their transfer to the Development Fund for Iraq, it being understood
that, unless otherwise addressed, claims made by private individuals or
non-government entities on those transferred funds or other financial assets
may be presented to the internationally recognized, representative government
of Iraq; and decides further that all such funds or other financial assets or
economic resources shall enjoy the same privileges, immunities, and protections
as provided under paragraph 22.
Id. PP22-23 (emphasis in original).
[FN182]. See generally Claims Resolution Tribunal, at
http://www.crt-ii.org/index_en.phtm (last visited Jan. 24, 2005).
[FN183]. Combs, supra note 166, at 538-39 (describing the dispute
resolution system). The Holocaust Tribunal acquired jurisdiction under
settlement of a U.S. class action. See In
re Holocaust Victim Assets Litig., 105 F. Supp. 2d
139,
165 (E.D.N.Y. 2000) (approving the Holocaust
Tribunal and Fund in settlement of consolidated class actions); In
re Holocaust Victim Assets Litig., 225 F.3d 191, 193 (2d Cir. 2000) (affirming denial of motion to intervene by a Polish class
in a worldwide class action).
[FN184]. Combs, supra note 166, at 538.
[FN185]. But see Alperin
v. Vatican Bank, 242 F. Supp. 2d 686, 695 (N.D. Cal. 2003) (dismissing claims arising during World War II as
presenting nonjusticiable political questions).
[FN186]. The International Commission on Holocaust Era Insurance
Claims, at http://www.icheic.org (last visited Jan. 24, 2005).
[FN187]. International Commission on Holocaust Era Insurance
Claims, About ICHEIC, at http://www.icheic.org/about.html (last visited Jan.
24, 2005).
[FN188]. International Commission on Holocaust Era Insurance
Claims, Memorandum of Understanding, P8, at
http://www.icheic.org/pdf/ICHEIC_MOU.PDF (last visited Jan. 24, 2005).
[FN189]. Press
Release, International Commission on Holocaust Era Insurance Claims, $16
Million Paid to Holocaust-Era Insurance Claimants From ICHEIC Humanitarian Fund
(Mar. 30, 2004), at http://www.icheic.org/newsroom.html.
[FN190]. Press Release, International Commision on Holocaust Era
Insurance Claims, ICHEIC has Made $108 Million in Offers for Shoah-era
Insurance Policies (Nov. 18, 2004), at
http://www.icheic.org/pdf/Press%20Release%2011-18- 04.pdf.
[FN191]. In
re Assicurazioni Generali S.P.A Holocaust Ins. Litig., 228 F. Supp. 2d 348,
353-58 (S.D.N.Y. 2002).
[FN193]. .See Ownership and Use of Farm Land Act, State Gazette
No. 17, arts. 10(2)-(6) (1991) (Bulg.), available at www.bild.net/legislation.
[FN194]. .See Restitution of Nationalised Real Property Act, State
Gazette No. 15, arts. 1-2 (1992) (Bulg.), available at
www.bild.net/legislation; Transformation and Privatisation of State-Owned and
Municipal Enterprises Act, State Gazette No. 38, art. 18(1) (1992) (Bulg.),
available at www.bild.net/legislation.
[FN195]. Ownership and Use of Farm Land Act, supra note 193, at
art. 10a(3).
[FN196]. Restitution of Nationalised Real Property Act, supra note
194, at art. 3(1).
[FN197]. .Id. at art. 3(2).
[FN198]. .Id.
[FN199]. Ownership and Use of Farmland Act, supra note 193, at
art. 10a(1).
[FN200]. .Id. at arts. 10a(2), 17(1).
[FN201]. .Id. at art. 10(2).
[FN202]. .See Restitution of Nationalised Real Property Act, supra
note 194, at arts. 1-2.
[FN203]. .Id. at arts. 1(1), 2(2).
[FN204]. .Id.
[FN205]. .Id. at art. 3(3). The property also could be restored if
the original building had been destroyed and the lot was still vacant. See
Restitution of Some Expropriated Property Act, State Gazette No. 15, art. 1(2)
(1992) (Bulg.), available at www.bild.net/legislation.
[FN206]. Restitution of Nationalised Real Property Act, supra note
194, at art. 4(1). Original owners who received bonds or had debts withheld in
exchange for their real property were not considered to have been compensated.
Id. at art. 4(1)-(2). Additionally, the former owners and their heirs of shops,
workshops, warehouses, and studios that were sold under Decree No. 60 of 1975 could
have their property restored if they reimbursed the buyers the sum the former
owner received from the sale. See Restitution of the Ownership of Some Shops,
Workshops, Warehouses, and Studios Act, State Gazette No. 105, art. 1 (1991)
(Bulg.), available at www.bild.net/legislation. If improvements were made to
the property, the purchaser was entitled to compensation by the original owner
for the value of those improvements, but the purchaser was not entitled to
retain the property. See id. at art. 2(1).
[FN207]. Restitution
of Nationalised Real Property Act, supra note 194, at art. 6(2). The three-year
term also applied if the property was being used as a child-care institution,
school, or health institution. Id. at art. 6(3).
[FN208]. .Id. at art. 6(2). A rental contract could be cancelled
until the three-year term had expired. Id.
[FN209]. Transformation and Privatisation of State-Owned and
Municipal Enterprises Act, supra note 194, at art. 18(1).
[FN210]. .Id. at art. 18(4).
[FN211]. Ownership and Use of Farm Land Act, supra note 193, at
art. 11(1).
[FN212]. .See id. at art. 13(1).
[FN213]. .See id. at art. 14(1).
[FN214]. .Id. at art. 14(3).
[FN215]. .Id. "The Court shall rule at the substance of the
matter." Id.
[FN216]. Transformation and Privatisation of State-Owned and
Municipal Enterprises Act, supra note 194, at art. 18(1).
[FN217]. .Id.
[FN218]. .Id. at art. 18(3).
[FN219]. Law XXV of 1991 On Partial Compensation for Damages
Unlawfully Caused by the State to Properties Owned by Citizens in the Interest
of Setting Owner Relations, P1(1)-(3), Supp. Nos. 1-2 (Hung.) [hereinafter
First Compensation Law]. The original version of the First Compensation Law
only compensated for losses that occurred after June 8, 1949 (the first session
of the Communist Parliament). See Compensation Law Passed, MTI Econews, June
26, 1991. Before the Hungarian President signed the original First Compensation
Law, the Hungarian Constitutional Court declared that section of the law
unconstitutional. Id. The Hungarian Parliament then extended the First
Compensation Law to property lost as far back as 1939. Id.
[FN220]. .See First Compensation Law, supra note 219, P4; Act XXIV
of 1992 On Providing in the Interest of
Settling Ownership Relations, Partial Compensation for Damages Unlawfully
Caused by the State to Properties of Citizens Through Applying Legal
Regulations Enacted From May 1, 1939, to June 8, 1994 § 3 (Hung.) [hereinafter
Second Compensation Law].
[FN221]. First Compensation Law, supra note 219, P1(2).
[FN222]. .Id. P2(1).
[FN223]. .Id.
[FN224]. .Id. P2(2)-(3).
[FN225]. .Id. P2(4).
[FN226]. .Id. P5(1)-(2). Compensation coupons paid interest for
three years at 75% the basic interest rate of Hungary's central bank. Id.
P5(3).
[FN227]. .Id. PP3(1), 5(1).
[FN228]. .Id. at Supp. 3.
[FN229]. .See id. P13.
[FN230]. .Id. P13(1).
[FN231]. .Id. at Supp. 3.
[FN232]. Second Compensation Law, supra note 220, Supp. 3. Weight
and karat guidelines were set forth for various objects when the weight and
composition could not be established. Id.
[FN233]. First Compensation Law, supra note 219, P4(2).
[FN234]. .Id. For property valued 200,001 to 300,000 Forints, only
50% of the value was compensated for the portion above 200,000 Forints. Id. If
the property was valued from 300,001-500,000 Forints, the claimant only
received 30% of the value for the value above 300,000 Forints. Id. For property
that was valued above 500,001 Forints, only 10% of the value of the property
was compensated for the value above 500,000 Forints. Id.
[FN235]. .Id. P4(3).
[FN236]. .Id.
P7(1)(a). Compensation coupons were accepted for up to at least 10% of the
value of state companies being transformed into business organizations. Id.
P8(3).
[FN237]. .Id. PP7(1)(b), (2).
[FN238]. .Id. P27. In certain locations, compensation coupon
holders got to bid first at 80% of the farmable land. Act LXIII of 1995, On the
Amendment of Act XXV of 1991 On the Partial Compensation for Damages Caused
Unlawfully in the Property of Citizens by the State, in the Interest of the
Settlement of Property Relationships § 1 (Hung.).
[FN239]. First Compensation Law, supra note 219, P23(1).
[FN240]. .Id. P23(2).
[FN241]. .Id. P9.
[FN242]. .See Act II of 1994 On the Amendment of Act XXV of 1991
on the Deadline of the Submission of Applications for Compensation, and on the
Partial Compensation of the Damage Caused
Unjustly in the Property of Citizens § 1(1) (Hung.) [hereinafter Act of 1994].
At first, a claim had to be submitted within 90 days of the enactment of the
First Compensation Law on September 14, 1991. See First Compensation Law, supra
note 219, P11(1). The final date for submission of a claim was then extended to
December 16, 1991. See Act L of 1991 Concerning the Amendment of Act XXV of
1991 On Partial Compensation for Damages Unjustly Caused by the State to
Properties of Citizens, in the Interests of the Settlement of Ownership
Relations, art. 1 (Hung.). Finally, the deadline was pushed back to Mar. 15,
1994. See Act II of 1994, supra, § 1(1).
[FN243]. First Compensation Law, supra note 219, P10(1).
[FN244]. .Id.
[FN245]. .Id. P10(3).
[FN246]. See discussion supra Part III(B)(3).
[FN247]. International Emergency Economic Powers Act, 50
U.S.C. § § 1701-06 (Supp. III 1976) [hereinafter
IEEPA]. The IEEPA states that the President's authority under the Act "may
be exercised to deal with any unusual and
extraordinary threat, which has its source in whole or substantial part outside
the United States, to the national security, foreign policy, or economy of the
United States, if the President declares a national emergency with respect to
such threat." Id. §
1701(a).
[FN248]. Exec. Order No. 12,170, 3 C.F.R. 457 (1980).
[FN249]. 31
C.F.R. § 535.203(e) (2003).
[FN250]. Dames
& Moore v. Regan, 453 U.S. 654, 665 (1981) (describing
stated purpose of the agreement).
[FN251]. Id.
[FN252]. Id. (internal quotations omitted) (describing the
agreement and the powers of the Tribunal).
[FN253]. Id.
[FN254]. Id.
[FN255]. Exec. Order
Nos. 12,276-12,285, 46
Fed. Reg. 7913-32 (Jan. 19, 1981) [hereinafter
Carter executive orders].
[FN256]. Exec.
Order No. 12,279, 46 Fed. Reg. 7919 (Jan. 19, 1981).
[FN257]. Exec.
Order No. 12,294, 46 Fed. Reg. 14,111 (Feb. 24, 1981).
[FN258]. Id. See generally Dames
& Moore, 453 U.S. at 665-66 (discussing the executive orders and the
Tribunal's obligations and powers).
[FN259]. Dames
& Moore, 453 U.S. at 688-89.
[FN262]. Id.
at 679-80 (internal citations and quotations
omitted).
[FN263]. 22
U.S.C. § 1621 et seq. (1976 & Supp. IV).
[FN264]. Id.
[FN265]. Dames
& Moore, 453 U.S. at 680 (citing 22
U.S.C. § 1623(a)).
[FN266]. Id.
at 681 (citing 22
U.S.C. § § 1644b, 1645, 1645a(5)).
[FN267]. Id.
at 683 (citing Ozanic
v. United States, 188 F.2d 228, 231 (2d Cir. 1951)).
[FN268]. Id.
at 688-89. At least since the case of the
"Wilmington Packet" in 1799, Presidents have exercised the power to
settle claims of U.S. nationals by executive agreement. See R.B. Lillich, The
Gravel Amendment to the Trade Reform Act of 1974: Congress Checkmates a
Presidential Lump Sum Agreement, 69 Am. J. Int'l L. 837, 844 (1975). In fact,
during the period of 1817-1917, "no fewer than eighty executive agreements
were entered into by the United States looking toward the liquidation of claims
of its citizens." Wallace McClure, International Executive Agreements:
Democratic Procedure Under the Constitution of the United States 53 (1941); see
also 14 Digest of International Law 247 (Marjorie M. Whiteman ed., 1970).
[FN269]. Foreign Claims Settlement Commission, Press Releases and
New Developments, at http://www.usdoj.gov/fcsc/index.html (last visited Jan.
26, 2005).
[FN270]. 22
U.S.C. § § 1621-45 (2000).
[FN271]. See Am.
& Eur. Agencies, Inc. v. Gillilland, 247 F.2d 95, 98 (D.C. Cir. 1957).
[FN272]. See Jessica Heslop & Joel Roberto, Property
Rights in the Unified Germany: A Constitutional, Comparative, and International
Legal Analysis, 11 B.U. Int'l L.J. 243, 271-73 (1993) (suggesting that German constitutional law allows
constitutionally protected property claims to be determined through special
mechanisms established through foreign affairs powers of executive and
legislative branches).
[FN273]. See discussion supra Part III(B)(2) (describing the
post-invasion approach to claims administration and quoting language of
Resolution 1483).
[FN274]. See generally Organization for Security and Co-operation
in Europe Mission in Kosovo ("OSCE"), Property Rights in Kosovo
(2002-2003), at http:// www.osce.org/doc-uments/mik/2003/06/974_en.pdf
(assessing confusion about property rights in Kosovo) [hereinafter 2002-2003
OSCE Property Report].
[FN275]. See Proctor
& Gamble Cellulose Co. v. Viskoza-Loznica, 33 F. Supp. 2d 644, 650 (W.D.
Tenn. 1998) (summarizing U.S. presidential
executive orders imposing trade prohibitions and asset freezes); Belgrade
v. Sidex Int'l Furniture Corp., 2 F. Supp. 2d 407, 410 (S.D.N.Y. 1998) (summarizing U.S. Government actions freezing Yugoslav
assets and prohibiting trade with Yugoslav entities).
[FN276]. See discussion supra Part III.
[FN277]. See Proctor
& Gamble, 33 F. Supp. 2d at 644, 653-54
(involving a suit by a U.S. firm against Yugoslav SOE, its purchasing agents,
and banks issuing letters of credit on its behalf for payment for raw
materials). The court noted and deferred to the Treasury Department presumption
that SOEs were controlled by the Yugoslav government, but found that the bank
had been privatized in 1990 and thus was no longer an SOE. Id.; see also Sablic
v. Croatia Line, 719 A.2d 172 (N.J. Super. Ct. App. Div. 1998) (suit alleging, among other things, wrongful termination
of employment by Croatian SOE).
[FN278]. See Milena
Ship Mgmt. Co. v. Newcomb, 995 F.2d 620, 625 (5th Cir. 1993) (noting that the Yugoslav government retained interest in
SOE because proceeds from any sale would be
paid into a government-controlled fund); Proctor
& Gamble, 33 F. Supp. 2d at 658
(characterizing SOE as managed by workers councils but owned by state).
[FN279]. See generally Belgrade,
2 F. Supp. 2d at 414 (stating that a "socio-political community"--a
subdivision of the state--retained equitable ownership and reversionary
property rights in SOE assets).
[FN280]. Proctor
& Gamble, 33 F. Supp. 2d at 657-58
(explaining the Yugoslav system of privatization, in which shares in SOEs were
sold, with proceeds paid into "development funds" established by the
state). Privatization also occurred under the auspices of states seceding from
Yugoslavia. See Sablic,
719 A.2d at 176-77 (finding former SOE to be
controlled by Croation privatization agency under 1992 law on privatization);
2002-2003 OSCE Property Report, supra note 274, at 3-4 (summarizing the
peculiarities of the property rights regime in Kosovo).
[FN281]. See discussion supra Part III(A)(1).
[FN282]. See generally Mrak, supra note 109, at 17 (noting
Slovenia's position in London-Club negotiations that "controlled Yugoslav
persons" should be excluded as debtor
beneficiaries).
[FN283]. S.C. Res. 1244, supra note 1, P5.
[FN284]. Id. P6.
[FN285]. Id. P10.
[FN286]. Id. P11(b).
[FN287]. Id. P11(d).
[FN288]. Id. P11(e). The Rambouillet Accords, brokered by the U.S.
and signed by representatives of political- and guerilla-resistance entities in
Kosovo, but not by the FRY, envisioned, among other things, a plebiscite after
three years to determine future status. Interim Agreement for Peace and
Self-Government in Kosovo, Feb. 23, 1999, U.N. Doc. S/1999/648 (June 7, 1999),
at http://www.state.gov/www/regions/eur/ksvo_rambouillet_text.html.
[FN289]. S.C. Res. 1244, supra note 1, P11(c).
[FN290]. Id. P11(g).
[FN291]. On the Authority of the Interim Administration in Kosovo,
U.N. Interim Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/1999/1 § 4
(July 25, 1999), amended by Amending UNMIK Regulation No. 1999/1, as Amended,
On the Authority of the Interim Administration in Kosovo, U.N. Interim
Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/2000/54 (Sept. 27, 2000).
[FN292]. UNMIK/REG/2000/54 § 6.1(a).
[FN293]. Id. § 6.1(b).
[FN294]. Id. § 6.2.
[FN295]. On the Status, Privileges and Immunities of KFOR and
UNMIK and Their Personnel in Kosovo, U.N. Interim Administration Mission in
Kosovo, U.N. Doc. UNMIK/REG/2000/47 § 3 (Aug. 18, 2000). Section 1 defines
"UNMIK" to mean the "international civil presence established pursuant
to Security Council resolution 1244... integrating the Interim Civil
Administration (United Nations); Humanitarian Affairs (UNHCR);
Institution-building (OSCE) and Reconstruction (EU) components." Id. § 1.
[FN296]. On the
Establishment of the Kosovo Trust Agency, U.N. Interim Administration Mission
in Kosovo, U.N. Doc. UNMIK/REG/2002/12 § 1 (June 13, 2002).
[FN297]. Id. § 12.3(a).
[FN298]. Id. § 2.1. The Constitutional Framework was set forth in
UNMIK Regulation 2001/9, which reserved to UNMIK (as distinct from the
provisional institutions of self-government set up by that UNMIK Regulation)
"[a]uthority to administer public, state and socially-owned property in
accordance with the relevant UNMIK legislation in force" and to regulate
"public and socially-owned enterprises after having consulted the Economic
and Fiscal Council and the Provisional Institutions of Self-Government" established
by that UNMIK Regulation. On a Constitutional Framework for Provisional
Self-Government in Kosovo, U.N. Interim Administration Mission in Kosovo, U.N.
Doc. UNMIK/REG/2001/9 § 8.1(q)-(r) (May
15, 2001).
[FN299]. UNMIK/REG/2002/12 § 5.5(a)-(b).
[FN300]. Id. § 6.1.
[FN301]. Id. § 6.1(m).
[FN302]. Id. § 6.1(o).
[FN303]. Id. § 6.1(q).
[FN304]. Id. § 6.1(r).
[FN305]. Id. § 6.1(s).
[FN306]. Id. § 6.2.
[FN307]. See id. § § 8.1-8.7; see also Operational Policies of the
Kosovo Trust Agency, § 5.1.1(a) (2003) [hereinafter KTA Operating Policies]
(describing spin-off as the preferred method, involving transferring assets and
certain liabilities of SOE to the newly incorporated subsidiary of the SOE,
which shall be sold to investors with proceeds deposited into trust accounts to
satisfy liabilities remaining with the SOE, including ownership claims).
[FN308]. On the Transformation of the Right of Use to
Socially-Owned Immovable Property, U.N.
Interim Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/2003/13 § 10 (May
9, 2003).
[FN309]. Id. § 10.2.
[FN310]. Id.
[FN311]. UNMIK/REG/2002/12 § 18.1.
[FN312]. Id. § 31.
[FN313]. See 2002-2003 OSCE Property Report, supra note 274, at
10 (concluding that Kosovo's property
registration system does not function effectively to secure property rights or
to enable a smooth transition to a market economy).
[FN314]. See id. at 36 (concluding that the regular courts were
not functioning effectively to protect property rights in Kosovo, despite a
generally solid legal framework).
[FN315]. See id. at 43 (expressing concern that municipal and
other authorities in Kosovo were
expropriating private property without following expropriation procedures).
[FN316]. See id. at 2-3 (summarizing property rights under the
ECHR).
[FN317]. UNMIK/REG/2002/12 § 30.1 (referring to the Special
Chamber of the Supreme Court of Kosovo, established by UNMIK Regulation
2002/13).
[FN318]. On the Establishment of a Special Chamber of the Supreme
Court of Kosovo on Kosovo Trust Agency Related Matters, U.N. Interim
Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/2002/13 § 4.1(c)-(d)
(June 13, 2002).
[FN319]. Id. § 7.
[FN320]. Id. § 9.3(b).
[FN321]. Implementing UNMIK Regulation No. 2002/13 on the
Establishment of a Special Chamber of the Supreme Court of Kosovo on Kosovo
Trust Agency Related Matters, U.N. Interim Administration Mission in Kosovo, U.N.
Doc. UNMIK/DIR/2003/13 § 21 (June 11, 2003).
[FN322]. Id. § 19.
[FN323]. UNMIK/REG/2002/13 § 8.
[FN324]. UNMIK/DIR/2003/13 § 9.
[FN325]. Id. § 40.
[FN326]. Id. § 43.
[FN327]. Id. § 44.
[FN328]. Id. § 22.7.
[FN329]. Id. § 43.4.
[FN330]. Id. § 32.
[FN331]. See id. § § 55-63.
[FN332]. Id. § 52.
[FN333]. Id. § 53.
[FN334]. UNMIK/REG/2002/13 § 10.3.
[FN335]. Id. § 3.1.
[FN336]. Id. § 3.2.
[FN337]. UNMIK/DIR/2003/13 § 4.
[FN338]. UNMIK/REG/2002/13 § 6.1.
[FN339]. Id. § 6.2 (referring to UNMIK/REG/2002/12 § 30.2, which
reads: "The Special Chamber shall not admit any suit against the Agency
unless the claimant submits evidence of having notified the Chairman of the
Board of his intention of filing such suit at least sixty (60) days prior to
the actual filing").
[FN340]. UNMIK/REG/2002/12 § 30.2 (the function of the suspenion of
proceedings is to facilitate amicable settlements).
[FN341]. KTA Operating
Policies, supra note 307, § 7.9.1.
[FN342]. Id. § 7.9.2.
[FN343]. Id. § 7.9.3.
[FN344]. UNMIK/REG/2002/13 § 9.1.
[FN345]. UNMIK/REG/2003/13 § 10.6.
[FN346]. Property Rights in Kosovo 2002-2003, supra note 274, at
28 (noting that the Special Chamber was not fully functioning in 2003).
[FN347]. UNMIK/REG/2002/12 § 24.3 (authorizing the SRSG to repeal
or modify KTA decisions and to mandate KTA actions).
[FN348]. See Underhill
v. Hernandez, 168 U.S. 250, 254 (1897).
[FN351].
UNMIK/REG/2002/12 § 6.2 (authorizing the creation of SOE subsidiaries and the
sale of SOE assets).
[FN352]. Exec.
Order No. 9698, 11 Fed. Reg. 1809 (Feb. 19, 1946).
[FN353]. .Hewitt
v. Speyer, 250 F. 367, 370 (2d Cir. 1918) (suit
challenging a contract that diverted monies allegedly due bondholders).
[FN354]. Michael D. Ramsey, Acts
of State and Foreign Sovereign Obligations, 39 Harv. Int'l L.J. 1, 16-22 (1998). Compare World
Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165-66 (D.C.
Cir. 2002) (act of state doctrine prevents
deciding whether the denial of an export license was a breach of contract); Libyan
Am. Oil Co. v. Socialist People's Libyan Arab Jamahirya, 482 F. Supp. 1175,
1179 (D.D.C. 1980) (adjudication of contract
rights reflected in arbitration award is nonjusticiable because of act of state
doctrine), vacated, 684
F.2d 1032 (D.C. Cir. 1981); with Walter
Fuller Aircraft Sales, Inc. v. Republic of the Philippines, 965 F.2d 1375, 1388
(5th Cir. 1992) (act of state doctrine did not
foreclose deciding a breach of contract case because the court need not
question foreign governmental policy decisions).
[FN355]. .Alfred
Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 697-98 (1976).
[FN356]. Id.
at 715 (Stevens, J., concurring).
[FN357]. Id.
at 725 (Marshall, J., dissenting).
[FN358]. See Int'l
Ass'n of Machinists & Aerospace Workers, (IAM) v. Org. of the Petroleum
Exp. Countries (OPEC), 649 F.2d 1354, 1360 (9th Cir. 1981).
[FN360]. Id.
[FN361]. See Bigio
v. Coca-Cola Co., 239 F.3d 440, 452 (2d Cir. 2001) (internal quotations omitted).
[FN362]. Id. (internal quotations omitted).
[FN363]. WMW
Machinery, Inc. v. Werkzeugmaschinehandel GMBH, 960 F. Supp. 734,
745 (S.D.N.Y. 1997).
[FN364]. See Ampac
Group, Inc. v. Republic of Honduras, 797 F. Supp. 973, 978 (S.D. Fla. 1992).
[FN365]. See World
Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165 (D.C. Cir.
2002).
[FN366]. S.C. Res. 1244, supra note 1, P11(g).
[FN367]. Id. P11(b).
[FN368]. Id. P11(a).
[FN369]. Id. P11(c).
[FN370]. Id. P11(b).
[FN371]. Id. P11(d).
[FN372]. Id. P11(a).
[FN373]. See Geneva
Convention for the Amerlioration of the Condition of the Wounded and Sick in
Armd Forces in the Field, art. 47, Aug. 12, 1949, 6
U.S.T. 3114, 3548, 75 U.N.T.S. 31, 62; Maxine
Marcus, Humanitarian
Intervention Without Borders: Belligerent Occupation or Colonization?, 25 Hous.
J. Int'l L. 99, 113 (2002) (summarizing
limitations on changes in local law).
[FN374]. S.C. Res. 1244, supra note 1, P11(e).
[FN375]. See Perritt, supra note 1, at 391 (explaining concept of
political trusteeship).
[FN376]. UNMIK/REG/1991/1 § 1(1).
[FN377]. Id. § 6.
[FN378]. UNMIK/REG/2002/12 § § 5.1, 5.3.
[FN379]. UNMIK/REG/2002/13 § 4.1(a).
[FN380]. Id. § 4.1(c).
[FN381]. Id. § 4.1(d).
[FN382]. On the Law Applicable in Kosovo, U.N. Interim
Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/1999/24 § 1.3 (Dec. 12,
1999) (expressly adopting the European Convention for the Protection of Human
Rights and Fundamental Freedoms as part of applicable law in Kosovo).
[FN383]. Protocol 1 of the ECHR says:
Every natural or legal person is entitled to
the peaceful enjoyment of his possessions. No one shall be deprived of his
possessions except in the public interest and subject to the conditions
provided for by law and by the general principles of international law.
The preceding provisions shall not, however,
in any way impair the right of a State to enforce such laws as it deems
necessary to control the use of property in accordance with the general
interest or to secure the payment of taxes or other contributions or penalties.
Protocol 1, art. 1, European Convention on
Human Rights and Fundamental Freedoms, May 18, 1954, 213 U.N.T.S. 262,
available at http:// www.hri.org/docs/ECHR50.html#P1.
[FN384]. See
discussion infra Part V(A)(4).
[FN385]. On the Establishment of the Housing and Property
Directorate and the Housing and Property Claims Commission, U.N. Interim
Administration Mission in Kosovo, U.N. Doc. UNMIK/REG/1999/23 § § 1-2 (Nov. 15,
1999).
[FN386]. Id. § 1.2(a).
[FN387]. Id. § 1.2(c).
[FN388]. Id. § 2.1.
[FN389]. Id. § 2.2.
[FN390]. On Residential Property Claims and the Rules of Procedure
and Evidence of the Housing and Property Directorate and the Housing and
Property Claims Commission, U.N. Interim Administration Mission in Kosovo, U.N.
Doc. UNMIK/REG/2000/60 § 3.2 (Oct. 31, 2000).
[FN391]. Id. § 13.4.
[FN392]. See 2002-2003
OSCE Property Report, supra note 274, at 15.
[FN393]. Id. at 12-24 (concluding that the Directorate and the
Commission were not yet functioning effectively to protect residential property
rights in Kosovo).
[FN394]. Arguably some such claims may represent creditor claims
against SOEs and POEs, which can be partially satisfied by the funds generated
by privatization and liquidation of SOE and POE assets.
[FN395]. See Lee C. Buchheit & G. Mitu Gulati, Sovereign
Bonds and the Collective Will, 51 Emory L.J. 1317, 1337-38 (2002) (proposing equity receivership as model for creditor
cooperation when states default on bonds); Joseph F. Rice & Nancy Worth
Davis, The Future
of Mass Tort Claims: Comparison of Settlement Class Action to Bankruptcy
Treatment of Mass Tort Claims, 50 S.C. L. Rev. 405, 427 (1999) (noting that creditors often cooperated with debtors to
avoid liquidation through equity receivership).
[FN396]. Bankruptcy Act of 1898, ch. 541, 30 Stat. 544, amended by
Chandler Act, ch. 575, 52 Stat. 840 (1938). The Bankruptcy Act was repealed by
the Bankruptcy Reform Act of 1978, Pub.
L. No. 95-598, 92 Stat. 2549 (codified as amended in scattered sections of U.S.C.).
See Adam J. Wiensch, Note, The Supreme
Court, Textualism, and the Treatment of Pre-Bankruptcy Code Law, 79 Geo. L.J.
1831 (1991) (describing the history of U.S.
bankruptcy law); John Fabian Witt, Review Essay, Narrating
Bankruptcy/Narrating Risk, 98 Nw. U. L. Rev. 303 (2003) (describing the short-lived efforts to enact federal
bankruptcy law in the first half of nineteenth century); Mark Bradshaw, Note,
The Role
of Politics and Economics in Early American Bankruptcy Law, 18 Whittier L. Rev.
739 (1997) (same).
[FN397]. See, e.g., Frederick Tung, Is International
Bankruptcy Possible?, 23 Mich. J. Int'l L. 31 (2001) (arguing that game theory demonstrates infeasibility of broad
cooperation in international bankruptcies and challenging the proponents of the
"universalist" approach to international bankruptcy, in which the law
of the home state of the bankrupt governs, even when assets are located in
other states).
[FN398]. See discussion supra Part III(A)(1).
[FN399]. See discussion supra Part II(B) (explaining difference
between succession and continuation in international law).
[FN400]. See discussion
infra Part VI(A)(5).
[FN401]. See Stanic, supra note 109, at 771.
[FN402]. See In
re Coastal Plains, Inc., 179 F.3d 197, 208 n.6 (5th Cir. 1999) (without disclosure, the "basic system of marshalling
of assets" in the resulting distribution of proceeds to creditors in
bankruptcy proceedings would be an impossible task); In
re Estate of Barsanti, 773 So. 2d 1206, 1209 (Fla. Dist. Ct. App. 2000) (affirming injunction was necessary for marshalling of
assets in probate proceeding); Kreta
Shipping, S.A. v. Preussag Int'l Steel Corp., 192 F.3d 41, 48 (2d Cir. 1999) (a judicial order to marshall assets is appropriate in
admiralty proceeding only when fund is inadequate to pay all claimants in full
(citing Petition
of Texas Co., 213 F.2d 479, 482 (2d Cir. 1954))).
[FN403]. See discussion supra Part III(B)(2).
[FN404]. See discussion supra Part V.
[FN405]. See discussion supra Part III(B)(1).
[FN406]. See
discussion supra Part III(B)(2).
[FN407]. See discussion supra Part III(B)(3).
[FN408]. See discussion supra Part VI(A)(5)-(6).
[FN409]. The UNCITRAL Draft Legislative Guide refers to this as
the "[p]rotection of the assets of
the debtor against the actions of creditors, the debtor itself and the
insolvency representative, and where the protective measures apply to secured
creditors, the manner in which the economic value of the security interest will
be protected during the insolvency proceedings." UNCITRAL Draft
Legislative Guide Part I, supra note 61, P28(d). The UNCITRAL Draft Legislative
Guide considers the desirable attributes of an automatic stay. UNCITRAL Draft
Legislative Guide Part II, supra note 75, PP176-219.
[FN410]. 11
U.S.C. § 362(a)(1) (2000).
[FN411]. See In
re Rimsat, Ltd., 98 F.3d 956, 965-66 (7th Cir. 1996) (affirming injunctions against
filings in foreign receivership proceeding).
[FN412]. The doctrine permits discretionary refusal of
jurisdiction in all common law countries,
but the standards for its application differ from country to country.
[FN413]. See Alexander Reus, Judicial
Discretion: A Comparative View of the Doctrine of Forum Non Conveniens in the
United States, the United Kingdom, and Germany, 16 Loy. L.A. Int'l & Comp.
L.J. 455, 481-82 (1994) (characterizing the
English version of the forum non conveniens doctrine as being more focused on
identifying the best forum).
[FN414]. See Donald J. Carney, Forum
Non Conveniens in the United States and Canada, 3 Buff. J. Int'l L. 117, 126
(1996) (describing the Canadian doctrine as first
determining whether a better forum exists for trying the case, and second,
determining whether the plaintiff would be disadvantaged by dismissal); id.
at 133 (procedural law changes that would
disadvantage a plaintiff would bar a dismissal on forum non conveniens grounds
in Canada).
[FN415]. Reus, supra note 413, at 489 (giving reasons for
hostility to the doctrine of forum non conveniens by civil law jurists); id. at
495-502 (discussing the controversy over the doctrine in Germany and other
civil law systems).
[FN416]. See Martine
Stückelberg, Lis Pendens and Forum Non Conveniens at the Hague Conference: The
Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and
Commercial Matters, 26 Brook. J. Int'l L. 949 (2001) (suggesting that eventual Hague convention on international
jurisdiction and judgment enforcement will contain some type of forum non
conveniens provision).
[FN417]. See discussion supra Part III(B)(2).
[FN418]. See discussion supra Part III(B)(1).
[FN419]. See discussion supra Part V(A)(1).
[FN420]. See generally Alvarez & Park, supra note 98
(evaluating NAFTA Chapter 11 and analyzing legal bases for enforcing
arbitration decisions on Chapter 11).
[FN421]. See Hague Conference on Private International Law, Works
in Progress: Judgements, at http://www.hcch.net/index_en.php?
act=progress.listing&cat=4 (last visited Jan. 26, 2005).
[FN422]. Restatement
(Third) of Foreign Relations Law of the United States, supra note 13, § §
481-82 (reviewing common law criteria for enforcement of foreign judgments).
[FN423]. See discussion supra Part I(C).
[FN424]. See discussion supra Part III(A)(3).
[FN425]. UNMIK/REG/2002/13 § 3.1.
[FN426]. See supra Part III(B)(1).
[FN427]. United Nations Compensation Commission, The
Commissioners, at http://www.unog.-ch/uncc/commiss.htm (last visited Jan. 28,
2005).
[FN428]. United Nations Compensation Commission, The Governing
Council, at http://www.unog.-ch/uncc/governin.htm (last visited Jan. 28, 2005).
[FN429]. Id.
[FN430]. United Nations Compensation Commission, supra note 427.
[FN431]. Id.
[FN432]. Id.
END OF DOCUMENT