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For each problem, answer true or false.  Where false, indicate how the answer can be made true.

1. Every country in the world is a member of the World Trade Organization (WTO).  True of false?

2. A federal court of the United States and a state court can both “hear,” i.e., listen to the claims and make a decision on, the same types of issues, irrespective of the area of law, e.g., whether it is criminal, bankruptcy, or intellectual property case.  True of false?

3. A court only needs to have personal jurisdiction over a party in order to hear a case.  True or false?

Section II.  Short Answer.

4. As members of the WTO, identify three (3) shared interests Japan, the EU, the USA and China all share.

5. Both Sudan and the US are signatories to the “New York Convention.”  A Sudanese company has won its case in a Sudanese arbitration panel.  The U.S. company has refused to pay this money (the arbitral award) to the Sudanese company.

The Sudanese company has come to a US court in order to enforce the award it won against the US company because the US company has refused to pay.  Under the NY Convention, how should the US Court decide?  describe the basis of your answer. 

6. You and a friend form a corporation (Company) together selling refurbished handbags.  Your responsibilities are to manage sales and your friend’s, Patty, is to manage operations and compliance.

It was decided to base the Company in Philadelphia, Pennsylvania (PA) because of its favorable tax laws, however, your second store in Brooklyn has strong sales due to your clientele’s interest in eco-friendly fashion.  For this same reason, online sales of the handbags do very well in the California (CA) market, and in fact, accounted for 18% of sales in 2011.

Your company has received a complaint letter from a CA purchaser (Purchaser) that claims the refurbished bag it bought from you is in violation of a CA state consumer product safety law, known as Proposition 65 (Prop 65).  The claim stems from a protective coating on the exterior of the bag that Purchaser claims has caused a painful and unsightly skin rash on her hand and shoulder.

She warns that unless you pay her $50K as compensation for her pain and suffering she is going to file a lawsuit against your Company.

6a)  Identify which forum(s) Purchaser could file her lawsuit in.

6b)  If Purchaser were to file in CA, could she obtain specific jurisdiction over your Company?   Yes or No? 

6c)  Describe on what basis Purchaser would argue that specific jurisdiction could be obtained over your Company.

6d)  Can general jurisdiction be obtained? (Yes or no?)  describe why/why not.

The Company has paid for three (3) trips for Patty to attend Prop 65 conferences in CA.  You discover that she did not actually attend any of those conference but instead went to an elite spa in Marin county each visit.  In fact, this is where she met Purchaser to whom she describeed that the Company had flown her out for this Prop 65 compliance conference but instead she was opting to go to this exclusive spa on the company’s dime (i.e. using the company’s money).

6e)  Under these facts, what claim could Purchaser assert if she started a lawsuit?  State the name of the claim only. 

6f)  What would Purchaser argue is her basis for such claim (the claim you identified in 10e)?

You believe that Patty was irresponsible in her apparent lack of compliance since she has oversight of the Company’s compliance with the law. You therefore think that if anyone is to pay she must and not the Company. Unfortunately, if it was learned that you blamed Patty instead of maintaining a united front it can hurt sales and tarnish the company’s image. How would you handle this situation?

7. A U.S. seller and an Indonesian purchaser of services enter into a contract for servicing fabric making machinery at the purchaser’s factory. The service contract included an exculpatory clause* that relieved the seller of all liability relating to his work. U.S. law generally enforces such clauses, and Indonesian law often voids such clauses.

The contract provided for the resolution of any issues to be determined via arbitration. No choice of law provision was included in the contract.

Soon after the U.S. seller serviced the machinery, it malfunctioned, injuring five workers and causing significant property damage to the Indonesian company’s factory in Jakarta. The Indonesian party commenced an arbitration hearing in Indonesia where the Indonesian Arbitration Panel (“IAP”) awarded it a money judgment of $50 million (USD).

The U.S. seller subsequently brought suit in a U.S. court challenging the decision of IAP that it pay $50M to the Indonesian purchaser.  The U.S. company sought to overturn the decision of the IAP citing the exculpatory clause.

The Indonesian purchaser contends that the $50M Award is enforceable under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”), which is an international agreement that the U.S. is a signatory to.

An exculpatory clause is a provision in a contract under which (1) one party is relieved of any blame or liability arising from the other party's wrongdoing, or (2) one party (usually the one which drafted the agreement) is freed of all liability arising out of performance of that contract.

For ex, a dry cleaner's receipt which includes a disclaimer freeing him or her from any liability for damage to the item to be cleaned during the dry cleaning process.?

7a) Is this Award enforceable under the New York Convention?  describe why/why not.

7b) Assuming Indonesian law is the same as U.S. law with respect to personal jurisdiction and subject matter jurisdiction, was there sufficient “minimum contact” with respect to the injury complained of by the Indonesian purchaser to justify Indonesian jurisdiction for a resolution of the case in Indonesia (as opposed to the U.S.)?  describe why.

7c) Will you argue in favor, or in defense of, the court overturning the decision of the IAP based on the U.S. seller’s argument regarding the exculpatory clause?  Describe the basis of your position.

ARTICLE ANALYSIS:

Japan, the European Union (EU) and the USA are filing a challenge against China with the World Trade Organization (WTO).  Read the below article and answer the following problems.

Obama announces WTO case against China over rare earths - CNN.com

By the CNN Wire Staff

2012-03-13T04:05:35Z

(CNN) -- The United States, the European Union and Japan are filing a challenge with the World Trade Organization against China's export restrictions on minerals that are crucial for the production of many high-tech devices, President Barack Obama announced Tuesday.
In a statement to reporters at the White House, Obama said the case seeks to force China to lift export limits on certain minerals known as rare earths.

China produces 97% of all rare earths, according to the European Union. The materials are used in products such as flat-screen televisions, smart phones, hybrid car batteries, wind turbines, energy-efficient lighting, electronics, cars and petroleum.

"We want our companies building those products right here in America," Obama said. "But to do that,American manufacturers need to have access to rare earth materials which China supplies. Now, if China would simply let the market work on its own, we'd have no objections."
Instead, Chinese policies "currently are preventing that from happening and they go against the very rules that China agreed to follow," Obama continued.

In an earlier statement, the European Union said the challenge mounted with Washington and Tokyo "formally requested dispute settlement consultations with China in the World Trade Organization."

However, U.S. Sen. Chuck Schumer, D-New York, said tougher steps are needed than the dispute resolution requested.

"There are faster ways to assert leverage on China than relying on the WTO, which could take years to resolve the case," Schumer said in a statement that called for U.S. efforts to block Chinese-funded mining projects in the United States as well as World Bank financing for Chinese mining projects.

Beijing defended its approach Tuesday.

"China has worked out its own policy on managing rare earths, which is in line with WTO regulations," Liu Weimin, a spokesman for the Chinese Ministry of Foreign Affairs, said at a news conference. "Our policies tackle not only the export of rare earth but also its production and exploration."

The United States accuses China of hoarding the valuable minerals for its own use. But China said its restrictions are motivated by environmental concerns.

White House Press Secretary Jay Carney told reporters Tuesday that the issue is about uniform rules for all, rather than an effort to hurt China.

"We believe that China's rise is a good thing for the Chinese people and for the global community, a good thing for the United States," Carney said. "It is also important that, as China becomes a bigger and bigger economic power, that China play by the same set of rules that other major economic powers play by."

China will have 10 days to respond to the case and must hold talks with the other parties within two months.

The EU statement said the challenge to the WTO targets raw materials including 17 rare earths such as cerium, neodymium and dysprosium, as well as tungsten and molybdenum. The elements and substances are used in high-tech and "green" businesses, as well as in cars, machinery manufacturing, chemicals and steel

Tungsten is used in lighting technology, in electronics and in automotive, aerospace and medical technologies, the EU statement said. China produces 91% of the world's tungsten.

Molybdenum is a metallic element used for filaments in light bulbs. China produces 36% of the world's molybdenum, according to the EU statement.

Most of the time, rare earths cannot be substituted for without resulting in a redesigned and more costly product, the EU statement said, adding: "Their non-availability can lead to the disruption of whole value chains."

China has gradually tightened export restrictions on the materials through raising export taxes and "drastically reducing the export quota," according to the European Union. In 2010, China reduced the quota by 32% for domestic companies and 54% for foreign-invested companies.

"Because China is a top global producer for these key inputs, its harmful policies artificially increase prices for the inputs outside of China while lowering prices in China," said a Tuesday statement from the U.S. trade representative.

"This price dynamic creates significant advantages for China's producers when competing against U.S. producers -- both in China's market and in other markets around the world," said the U.S. statement. "The improper export restraints also contribute to creating substantial pressure on U.S. and other non-Chinese downstream producers to move their operations, jobs and technologies to China."

The WTO, the body tasked with monitoring trade between nations, will be asked to be a facilitator in talks with China, an Obama administration official said Monday.

"China's restrictions on rare earths and other products violate international trade rules and must be removed," Karel De Gucht, EU trade commissioner, said in a statement. "These measures hurt our producers and consumers in the EU and across the world, including manufacturers."

Despite a recent ruling in a separate dispute over different raw materials, "China has made no attempt to remove the other export restrictions," he said. "This leaves us no choice but to challenge China's export regime again to ensure fair access for our businesses to these materials."

Ron Kirk, the U.S. trade representative, said, "America's workers and manufacturers are being hurt in both established and budding industrial sectors by these policies. China continues to make its export restraints more restrictive, resulting in massive distortions and harmful disruptions in supply chains for these materials throughout the global marketplace."

Concern in the United States over the supply of rare earths resulted in a September hearing on the matter by the House Foreign Affairs Subcommittee on Asia and the Pacific.

Of particular concern was how vital the minerals are for top-of-the-line weapons, including missile guidance systems, drones and the new F-35 Joint Strike Fighter.

American companies are trying to answer the demand. Molycorp Inc., one of the few producers of rare earth minerals outside China, has urged Congress to do more to confront the problem and encourage research and development. Molycorp has mines in California and Colorado.

In 2010, China temporarily halted shipments of rare earths to Japan, prompting a sharp spike in prices of the minerals.
The EU said it has raised the issue repeatedly with China over the past few years without success. If no solution could be found through the consultation process, the dispute could be transmitted to a WTO panel for a ruling, the European Union said.

1. Japan, EU and USA are filing a challenge against China for what reason(s)? 

2. Identify what Japan, the EU and the USA’s interests are for this particular action (and not in general as you answered above). 

3. Identify what China’s interests are. Monopoly.

State the public policy reasons for President Obama to bring such a challenge to the WTO.

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