Transfers by Recipient Nations

On October 16, 1975, Ambassador Robert J. McCloskey, Assistant Secretary of State for Congressional Relations, responded to an inquiry from Congressman Benjamin S. Rosenthal regarding a reported transfer of aircraft from Libya to Turkey and the protest by the United States to Libya regarding the transfer. He pointed out that there was no breach of any legal obligation on the part of Turkey in accepting the aircraft. The following is an excerpt from Ambassador McCloskey's letter:

Reports from several sources have confirmed that Libya has delivered to Turkey seven F-5A aircraft, which were purchased by Libya from the United States in 1967 under foreign military sales procedures. The United States Government has not given its approval to any country to transfer to Turkey U.S.-supplied military equipment since the suspension of our military shipments on February 5, 1975. Libyan authorities did not request United States Government approval of this transfer and we had no advance knowledge of it from any source.

Accordingly, we are instructing our Embassy in Tripoli to lodge a protest with the Libyan Government, pointing out that failure to conform with restrictions on the transfer of U.S.supplied military equipment will be taken into account in our consideration of any future requests by the Libyan Government to purchase military items from within the United States.

The United States is making no current military sales to Libya. In these circumstances, we believe the protest as described above is the most effective way to encourage Libyan compliance with the terms of its FMS contracts.

Of course, our contract with Libya could not impose any obligations on third countries, and Turkey has not breached any legal obligation in accepting aircraft from Libya. Given Turkey's grave concern that its air defense is being incapacitated by the U.S. embargo, it is not surprising that Turkey has sought to procure military equipment from other sources. We are unaware of any similar previous_transaction for the transfer of military equipment by Libya to Turkey.

Dept. of State File No. P75 0160-0063.

Chapter 15

PRIVATE INTERNATIONAL LAW

Conflict of Laws

On November 3, 1975, the U.S. Supreme Court in Day and Zimmermann v. Challoner (No. 75-245; 44 U.S. Law Week 3262) vacated the judgment of the U.S. Court of Appeals for the Fifth Circuit in Challoner v. Day and Zimmermann, Inc., 512 F.2d 77 (1975). An injured U.S. serviceman and the estate of a deceased serviceman had brought a strict liability suit for damages against an ammunition manufacturer, based on the premature explosion of a howitzer round in Cambodia. The Court of Appeals had held that the District Court had properly applied Texas substantive law in finding the manufacturer liable, rather than applying Cambodian law which would be applicable under Texas conflict of law rules.

The Appellate Court considered that it was justified in not applying Cambodian law on the grounds that (1) Cambodia had no interest in the dispute between American litigants, while the policies of all U.S. jurisdictions having an interest would be carried out under Texas substantive law; (2) under international law principles, Cambodia had no right to determine rights or liabilities as between foreign subjects arising out of the military activities of a foreign power, for "a nation is understood to cede a portion of her territorial jurisdiction where she allows the troops of a foreign nation to pass through her dominions"; and (3) the very nature of the Federal Court justified such result. On the final point, the Appeals Court said:

We are a Court of the United States, an instrumentality created to effectuate the laws and policies of the United States. We conclude that in this case we have no warrant, legal or moral, to frustrate well established American policies by an application of the local policies of a foreign government.

The Supreme Court, in vacating the judgment and remanding the case for further proceedings, held that in a diversity action a Federal Court must follow the conflict of law rules of the State in which it sits and "is not free to engraft onto those rules exceptions or modifications which may commend themselves to the Federal

Court, but which have not commended themselves to the State in which the Federal Court sits."

Multilateral Conventions

Inter-American

The United States participated with other states members of the Organization of American States in the Inter-American Specialized Conference on Private International Law, held in Panama City, January 14-30, 1975, which adopted and opened for signature six inter-American conventions in the field of private international law. These were: (1) the Inter-American Convention on Letters Rogatory; (2) the Inter-American Convention on the Taking of Evidence Abroad; (3) the Inter-American Convention on International Commercial Arbitration; (4) the Inter-American Convention on the Legal Regime of Powers of Attorney to be Used Abroad; (5) the Inter-American Convention on Conflict of Laws concerning Bills of Exchange; Promissory Notes and Invoices; and (6) the Inter-American Convention on Conflict of Laws concerning

Checks.

The United States did not sign any of the six conventions at Panama City. On March 14, 1975, it referred the texts to the Secretary of State's Advisory Committee on Private International Law, for consideration with respect to appropriate United States action. Ambassador Richard D. Kearney, United States Member of the International Law Commission and Chairman of the Committee, recommended that the Committee give serious study to the conventions on evidence, letters rogatory, and international commercial arbitration. The convention on powers of attorney was to be referred for further expert views.

Prior to the Conference, the United States had expressed the view that it was not interested in participating in regional conventions dealing with bills of exchange, promissory notes and invoices, and checks. In light of that position, the U.S. delegation did not participate actively in the work of the Conference leading to adoption of the two conventions dealing with those subjects.

Minutes of Meeting of Secretary of State's Advisory Committee on Private International Law, 26th Meeting, Mar. 14, 1975.

Marriage Laws

United States comments concerning a proposed convention on conflict of laws in respect of marriage were transmitted to The

Hague on January 17, 1975, for submission to the Permanent Bureau of The Hague Conference on Private International Law, in reply to a questionnaire on the subject. The Twelfth Session of The Hague Conference had decided upon the development of such a convention as the first order of business for the Thirteenth Session.

The U.S. reply, representing as well the views of legal experts whom the U.S. Government had consulted, indicated that no final conclusion had been reached as to whether the convention should be concerned primarily with the law governing marriage as an allpurpose contract or should deal exclusively with the law governing particular issues relating to marriage, such as entitlement of a putative spouse by virtue of survival. It recommended that the Conference consider the extent to which the validity of a marriage may be affected by subsequent events; for example, the effect of a law in the state of celebration that seeks to validate retroactively a marriage that was initially invalid, or the effect of a change of domicile from a state under whose law a marriage is invalid to one whose law would hold the marriage good.

On the matter of scope, the United States recommended that the convention be of universal character, rather than based on reciprocity, and preferred that it not deal with the right to remarriage following a judicial decree or administrative decision of divorce, nullity, or declaration of absence or presumed death.

The United States questioned whether the convention should deal with prospective requirements; it considered the law of the place of celebration applicable. As to retrospective requirements, where the validity of a marriage already contracted is placed in issue, the United States suggested that "as a general principle, the law of the place of celebration should be applied in situations where this law would hold the marriage valid except where a contrary result is required by the law of the state which has the greatest interest in the determination of the issue. . . . ” It added, "Where a marriage fails to meet the requirements of the state of celebration, it should nevertheless be upheld if this result is required by the law of the state of greatest interest."

The United States recommended that the convention not deal with recognition of foreign decisions as to marital status, but considered that a separate convention on the subject might be desirable.

The Hague Conference questionnaire and a report by Adair Dyer, Jr., on the conflict of laws in respect of marriage and recognition abroad of decisions in respect of the existence or validity of marriages are contained in Marriage, Preliminary Doc. No. 1, July 1974, Perm. Bureau of The Hague Conference on

Private International Law, The Hague. See also Dept. of State airgram to The Hague A-342, Jan. 17, 1975.

International Commercial Arbitration

Foreign Arbitral Awards

In Parsons & Whittemore Overseas Co., Inc. v. Société Générale de L'Industrie du Papier, 508 F.2d 969 (1974), the U.S. Court of Appeals for the Second Circuit, on December 23, 1974, affirmed the decision of the U.S. District Court for the Southern District of New York, granting summary judgment to the defendant Egyptian corporation, confirming a foreign arbitral award holding the plaintiff American corporation liable for breach of contract.

The American corporation, Parsons & Whittemore Overseas Co., Inc. (Overseas), had contracted with Société Générale (RAKTA) in 1962 to construct a paperboard mill in Egypt and to supervise it for a year. The Agency for International Development (AID) was to finance the project by supplying RAKTA with funds to purchase letters of credit in Overseas' favor. The contract contained an arbitration clause and a force majeure clause. Before completion of the work, the Egyptian hostility to Americans that accompanied the Arab-Israeli Six-Day War in 1967 caused the majority of the Overseas' work crew to leave Egypt. On June 6, 1967, the Egyptian Government broke diplomatic ties with the United States and expelled all Americans except those who applied and qualified for a special visa.

Overseas notified RAKTA that it regarded the force majeure clause as covering its suspension of the project. RAKTA disagreed and sought damages for breach of contract. Overseas refused to settle, and RAKTA invoked the arbitration clause. An arbitral tribunal governed by the rules of the International Chamber of Commerce issued a preliminary award for RAKTA on the ground that the force majeure defense was only good during the period from May 28 to June 30, 1967. It noted that Overseas had made only perfunctory efforts to obtain special visas and stated that AID's withdrawal of financial backing did not justify Overseas' abandoning the project. In its final award the Arbitral Tribunal held Overseas liable to RAKTA for $312,507.45 in damages for breach of contract and $30,000 for RAKTA's costs. It also held Overseas responsible for three-fourths of the arbitrators' compensation, set at $49,000.

Overseas filed an action to prevent RAKTA from enforcing the arbitral award for breach of contract and sought a declaratory judgment to prevent RAKTA from collecting the award out of a