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Weapons of Mass Destruction on the Seabed and the Ocean Floor and in the Subsoil Thereof to the Western Sectors of Berlin, the authorities of the three powers, acting in the exercise of their supreme authority, took the necessary steps to ensure in accordance with the established procedures that this Treaty was applied in the Western Sectors of Berlin subject to Allied rights and responsibilities in the field of disarmament and demilitarization. The application of the Treaty to the Western Sectors of Berlin can therefore in no way affect matters of security and status. The Government of the Federal Republic of Germany, for its part, in its declaration on Berlin also stated that the rights and responsibilities of the Allies in the fields of disarmament and demilitarization were not affected. Consequently, it is the opinion of the three Governments that the extension of this Treaty to the Western Sectors of Berlin is entirely consistent with the Quadripartite Agreement.

Dept. of State File No. P76 0124-2219.

Foreign States

In Pfizer, Inc. v. Government of India, 44 U.S.L.W. 2541 (1976), the U.S. Court of Appeals for the Eighth Circuit held, on May 19, 1976, in an antitrust suit arising out of alleged antitrust violations committed by six drug manufacturers against foreign governments, that the foreign governments were "persons" within the meaning of section 4 of the Clayton Act (15 U.S.C. 15) and thereby entitled to sue for treble damages.

The Court considered two Supreme Court decisions; United States v. Cooper Corp., 312 U.S. 600 (1941), which held that the U.S. Government was not a "person" under the antitrust laws, and Georgia v. Evans, 316 U.S. 159 (1942), which held that a State of the United States was a "person" under those laws. The Court of Appeals held that Georgia v. Evans should control since, as noted by the Supreme Court in that case, the Federal Government had an array of remedies and sanctions open to it in antitrust litigation, while others who might be injured had only the treble-damage suit. It added:

When Congress enacted the antitrust laws, it expressly recognized that illegal contracts, conspiracies and monopolies by domestic firms may affect commerce with other nations. In view of the holding in Evans that Congress intended domestic State governments to have standing to sue for treble damages under the antitrust laws, we conclude that Congress intended other bodies politic, such as a foreign government, to enjoy the same right. There is certainly no indication of a contrary intent in the legislative history. In contrast to Cooper, no other provisions of the Act support the contention that Congress intended to exclude foreign nations. We find that the district court correctly held that

foreign nations are “persons” under § 4 of the Act entitled to sue for treble damages. [404 F. Supp. 57, 63.]

See also the 1975 Digest, pp. 33, 134-137, regarding Pfizer, Inc. v. Lord, 522 F.2d 612 (1975).

Securities Laws


The extraterritorial application of U.S. securities laws was at issue in Recaman v. Barish, 408 F. Supp. 1189 (1975). Action was brought by citizens of Colombia for compensatory and punitive damages based on alleged violations of antifraud provisions of the Securities Act of 1933 (15 U.S.C. 77e), the Securities Exchange Act of 1934 (15 U.S.C. 78j (b)), and Securities and Exchange Corporation Rule 10b-5 promulgated thereunder. The securities involved were those of a foreign investment trust organized under the laws of the Bahama Islands.

The U.S. District Court for the Eastern District of Pennsylvania. on December 11, 1975, dismissed the action for lack of subject matter jurisdiction. The opinion stated, in part:

It is clear that in spite of the usual presumption against extraterritorial application of legislation, the securities laws of the United States do reach conduct of various kinds occurring outside the United States. Their reach can extend, in some circumstances. to dealings in the securities of foreign issuers. . . . The courts have limited the application of the securities acts to transactions with which the United States has a significant connection or interest. In assessing the connection between a particular transaction and the United States, two basic tests have been applied.

These tests were developed in two leading cases decided by the Second Circuit: Schoenbaum v. Firstbrook, 405 F.2d 200 (2d Cir. 1968), modified 405 F.2d 215 (2d Cir. 1968), cert. den. 395 U.S. 906 (1969) and Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326 (2d Cir. 1972). The test first established by the Second Circuit was implicitly applied in Schoenbaum. Termed the "objective territorial principle," it is set forth in § 18 of the Restatement (Second) of Foreign Relations Law of the United States (1965) and extends jurisdiction to conduct which occurs outside a territory, but which has an impact within the territory. Under this test, the main consideration is the impact that the transaction has upon domestic investors or the domestic securities market.

The second test was set forth by the Court in Leasco. It extends jurisdiction to include acts or omissions which occur within a territory's boundaries, even though the effect of such acts or omissions may be felt outside the territory. Sometimes referred to as the "subjective territorial principle," it is set forth in § 17 of the Restatement (Second) of Foreign Relations Law of the United States (1965). To come within this jurisdictional test, significant

conduct with respect to the alleged violations must occur within the United States. . . .

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The Court concluded that the activities that occurred in this case were insufficient to satisfy either test. They failed the impact test because the securities of the foreign investment trust organized under laws of the Bahama Islands were never permitted to be listed or traded on any U.S. stock exchange or over the counter, and the transactions in which plaintiffs, who were not residents or citizens of the United States at the time, purchased shares were not executed by any U.S. dealer, even though the purpose of the foreign issue was to invest in U.S. realty.

Regarding the significant conduct test, the Court noted that the securities were not only never listed or traded on any U.S. stock exchange or over the counter, but were offered to plaintiffs in Bogota, Colombia, and paid for from plaintiff's account in a Miami bank. It ruled that there was insufficient situs of fraudulent acts in the United States to make the antifraud provisions of U.S. securities laws applicable, notwithstanding the investment trust's ownership of substantial real estate in the United States and the U.S. citizenship and residency of some of the directors and officers of the trust and its subsidiaries.

Patent Laws

Decca Limited v. United States, 544 F. 2d 1070 (1976), was a suit brought against the United States for patent infringement by reason of the Government's use of its worldwide Omega system for positioning ships and aircraft. The case came before the U.S. Court of Claims on the Government's exceptions to the opinion, findings of fact, and conclusion of law of Trial Judge Cooper, who held that the United States had infringed within the United States claims 1, 4, and 11 of O'Brien et al., U.S. Patent No. 2.844,816, and must pay reasonable and entire compensation under 28 U.S.C. 1498. The Court of Claims, in its decision of July 9, 1976, agreed with the trial judge's decision, except for one sentence, and stated:

We agree in general with the trial judge's handling of the extraterritoriality problem, but have eliminated a sentence to avoid giving the impression that we rely on what we believe to be the not unchallengeable proposition, that the territorial requirements of the United States patent laws are met simply because United States flag vessels or aircraft, receiving Omega signals while on or over the high seas, are ambulatory portions of United States territory. We think the territorial requirements of our laws are met otherwise in this case, so this juridical prop is not necessary.

The problem arises from the fact that... United States patent laws are territorial in their application and by their own terms are not infringed by acts in foreign countries that would be infringements at home. .

It has several times been held that the fiction, as it has been called, that a United States flag vessel is United States territory, does not extend so far as to make general United States laws, enacted for territorial application, and without express reference to shipping, applicable to United States flag ships at sea..

In the situation of "flag of convenience" ships beneficially owned by United States nationals, but under foreign flags. the Supreme Court has had difficulty, whether and when to imply exceptions to United States law of this kind. . . .Sometimes it does so, sometimes not, as these cases illustrate.

It might be thought... that an implied exemption of foreign flag shipping from U.S. laws, even when in U.S. ports, might as a logical corollary demand a corresponding extension of the same laws to U.S. ships, even though at sea or in foreign waters. However, an exception to a statute is always easier to imply than an extension is. Any such proposed extension would have to be considered on the merits of the case. Of course, when Congress expressly and consciously legislates for shipping or aircraft, the problem vanishes: it is solely one of construing general statutes. In the case of the patent laws the canon of hostile interpretation provides an added obstacle to implying an extension of the U.S. patent laws

In view of the foregoing, we think a decision founded on the fiction that for purposes of the patent laws, U.S. ships and planes wherever found, are United States territory, would be founded on water. We think, however, that the question can be left open, and still we find enough other basis for concluding that the location of the infringement is within United States territory, not abroad. [Id. at 1072-1974]

The Court of Claims went on to hold that the U.S. Government's allegedly infringing radio navigation system was located in the United States for the purposes of U.S. patent laws, although one of the broadcasting stations was located in a foreign country (Norway) and other foreign locations were contemplated, and although the ships and planes receiving the signals were generally not within the United States. It reached its conclusion on the grounds that the "master" station or stations were in the United States, all stations were monitored, all stations in the system had to be brought into exact synchronization with the U.S. stations, and the broadcasting equip ment was designed and built by the United States.

Criminal Jurisdiction

Narcotics Control

Section 504 of the International Security Assistance and Arms Export Control Act of 1976 (P.L. 94-329; 90 Stat. 764), approved June 30, 1976, added a new subsection to section 481 of the Foreign Assistance Act of 1961, with respect to international narcotics control, providing in part as follows:

(c) (1) Notwithstanding any other provision of law, no officer or employee of the United States may engage or participate in any direct police arrest action in any foreign country with respect to narcotics control efforts.

See post, Ch. 11, § 2, pp. 602-610, for Drug Enforcement Administration guidelines, prohibiting U.S. personnel from engaging in direct police actions in foreign countries with respect to narcotics control but permitting passive presence in the vicinity of arrests by foreign officers.

Trial Abroad

On May 17, 1976, the Department of State instructed the U.S. Embassy in Bonn that it could not accept the trial of an individual in the Federal Republic of Germany (F.R.G.) by F.R.G. authorities for crimes committed in the United States, in the absence of a showing of a context sufficient to establish F.R.G. jurisdiction. The Department agreed, however, to the supplying of evidence of alleged crimes of the individual in the United States for use in an F.R.G. trial for crimes arising in the Federal Republic of Germany, to show recidivism or habitual or hard-core criminality, thereby possibly supporting a stiffer sentence.

The Department's instruction was in response to the Embassy's report of a notification from the F.R.G. Federal Criminal Police (BKA) that an individual arrested on bank robbery charges in the Federal Republic had confessed to committing ten armed robberies in the United States. The BKA had raised the question of prosecution in the Federal Republic for crimes committed in the United States and the furnishing of documents supporting such prosecution.

Dept. of State telegram no. 121320 to Bonn.

Irregular Apprehension

United States v. Cotroni, 527 F.2d 708 (1975), decided on December 22, 1975, by the U.S. Court of Appeals, Second Circuit, involved evidence obtained by foreign authorities in a manner which does not comport with U.S. constitutional and statutory requirements. The evidence came from Canadian wiretaps placed by that country's police without judicial authorization such as is required by Title III of the Omnibus Crime Control Act of 1968 (18 U.S.C. 2510 et seq.).

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