By HOUSTON PUTNAM LOWRY (fn*) AND PETER W. SCHROTH (fn**)
Continuing the trend described last year, (fn1) in 1993 there was less
legislation relating to international matters, but more cases interpreting
existing international legislation. Practitioners have begun to use this
legislation, which was enacted primarily in the late 1980s and early 1990s, and
this increased use is increasingly reflected in reported cases interpreting the
legislation.
Part I of this article describes the 1993 Connecticut legislation and the
recently ratified Convention on the Limitation Period in the International Sale
of Goods. Part II is a discussion of five decisions of the Connecticut courts
and the United States District Court for the District of Connecticut.
I. LEGISLATION
A. Limited Liability Company Act.
An 1892 German invention, the Gesellschalt mit beschrankter Haftung ("GmbH'),
arrived in Connecticut 101 years later as the limited liability company. The key
concept is separation of limited liability from easy transfer of ownership, with
its attendant problems of protecting public shareholders. The availability of
two principal corporate forms, public and private, is now the norm in most of
the world, including both Eastern and Western Europe (including England since
1985), Latin America, the Middle East and non-anglophone Asia and Africa. (fn2)
Both enjoy limited liability similar to that of corporations under our law,
(fn3) but private companies are intended for more restricted ownership,
comparable to that of partnerships. The 1972 accession of the United Kingdom to
the European Economic Community led to the introduction of a version of this
system in England. In England, the company whose shares can be traded readily is
now a public limited company (plc), while the traditional "Limited" now refers
to the entity with more restricted transferability.
Connecticut's Limited Liability Company Act, (fn4) which became effective on
October 1, 1993, comes near the end of an extraordinarily rapid development in
the United States: in 1989, only two states had statutes authorizing such
companies, but now they are available in approximately forty. (fn5) Unlike the
case of a limited partnership, no entity is generally liable for an LLC's debts
and the members do not risk personal liability simply by participating in
management. An LLC enjoys the limited liability characteristic of a corporation
but, as an "unincorporated association" for federal tax purposes, can elect to
be taxed on the same basis as a partnership. (fn6) Unlike an S corporation,
(fn7) an LLC may have corporate and non-resident alien shareholders. The LLC's
tax and other advantages, together with the familiarity of the form to many
foreign investors, make it an interesting option for foreign- or partially
foreign-owned businesses.
Section 8(b) of the Act allows professionals "licensed or otherwise authorized
by law in this state or any other jurisdiction" (fn8) to form limited liability
companies. The language of this section tracks the amended Connecticut
Professional Corporation Act. (fn9) This means that professionals from multiple
jurisdictions can form a single LLC to practice in more than one jurisdiction.
(fn10) So far, Connecticut appears to be unique among all the states in
providing this explicit safe harbor provision for multi-jurisdiction
professional practices.
B. An Act Concerning International Prisoner Transfers.
This is a very short act, which took effect on its passage. (fn11) Incarcerated
citizens often prefer to spend their sentences in the prisons of their own
country, particularly if the prison conditions in their own country are better
than those where they were sentenced. The United States has concluded a number
of prisoner exchange treaties, but these require implementing legislation,
without which the Commissioner of Correction cannot release prisoners committed
to his custody.
Section 1 allows the Commissioner to transfer consenting prisoners to the
country of their nationality. Prisoners who prefer to spend their entire
sentences in Connecticut are free to do so: no prisoners will be transferred
against their will.
Connecticut courts sometimes impose indeterminate sentences, a concept
unfamiliar or unacceptable to some foreign countries. Section 2 allows the Board
of Pardons to set a determined date to facilitate the prison transfer if the
prisoner has an indeterminate sentence.
C. 1974 Limitations Convention as Amended by 1980 Protocol.
The 1974 Convention on the Limitation Period in the International Sale of Goods
(the "1974 Limitation Convention") and its 1980 Protocol (fn12) will come into
force for the United States on December 1, 1994. (fn13) When they apply, the
1974 Convention and its Protocol will override (fn14) Section 2-725 of the
Uniform Commercial Code. (fn15)
As an example of the problems these treaties address, suppose Seller, located in
Connecticut, contracts to sell goods to Buyer, located in Country A. Seller
ships directly to Buyer's customer in Country B. The goods are defective, but it
takes Buyer's customer, behaving reasonably in the circumstances, 4 1/2 years to
discover the defect. Seller is unwilling to correct the defect, because its
one-year warranty period has expired. Buyer may have an action against Seller
and Buyer's customer may have an action against Buyer or Seller or both, but in
which court?
Such a suit probably cannot be brought in Connecticut, because there is a
four-year statute of limitations for suits of this type. (fn16) Suppose the
relevant limit is ten years in Country A and only two years in County B. If the
plaintiff's "forum shopping" has been thorough enough to uncover these facts, he
will try to take advantage of the law of Country A. Of the three countries,
Country A seems to have the least to do with the facts, but perhaps it is the
only jurisdiction in the world where the plaintiff may win his lawsuit. A system
permitting such forum shopping is the opposite of the stability and
predictability conducive to efficient trade. Even leaving aside differences in
substantive law, when the limitation period may be anything from six months to
thirty years, (fn17) calculation of a company's financial exposure for breach of
contract is impossible and insurance correspondingly expensive or unavailable.
However, the problem is actually even more complex than that. Common-law
countries usually treat the limitation period as procedural (fn18) and therefore
are likely to apply their own statutes of limitation to lawsuits in their
courts, even when the transaction, and even the substantive law governing the
action, is in some other jurisdiction. Civil-law countries, on the other hand,
usually consider that the appropriate limitation period should be selected
according to the applicable choice-of law rules. Each forum uses its own
choice-of-law rules (fn19) to determine the applicable law for this purpose.
Yet another level of complexity relates to "tolling" of the applicable statute
of limitations. Under certain circumstances. (fn20) the applicable statute of
limitations is deemed not to have started running, or deemed no longer to be
running, if it bad started to run. (fn21) The rules relating to tolling vary
even more widely from jurisdiction to jurisdiction than do the limitation
periods and, whereas the limitation periods are usually easy to find in the
statutes, the rules on tolling are typically uncodified and may be much more
difficult to find. Choice-of-law rules do not require the tolling rules to be
taken from the same jurisdiction as the applicable limitation period, so the
statute of limitations may be expanded or contracted in ways its drafters did
not expect.
These problems were recognized in 1969 by the United Nations Commission on
International Trade Law ("UNCITRAL"). The 1974 Limitation Convention was adopted
by a diplomatic conference on June 14, 1974. It was amended by a Protocol in
1980 to make it conform to the United Nations Convention on Contracts for the
International Sale of Goods (also drafted by UNCITRAL). (fn22) The 1974
Limitation Convention came into force on August 1, 1988. It has received more
attention since the CISG Convention was promulgated, but undoubtedly will
receive even more attention after the United States becomes a party.
The 1974 Limitation Convention applies only to contracts for the sale of goods
and not, for example, to product liability lawsuits. (fn23) It provides for a
four-year limitation period and a comprehensive scheme of rules relating to
tolling. It is intended to solve the forum shopping problem, by making the
statute of limitations the same in all contracting countries.
II. CASES.
A. Solomat Enterprises, Inc. v. Neotronics Technology PLC. (fn24)
Plaintiffs and Defendant contracted for Defendant to purchase Plaintiffs'
instrument division in a complex transaction involving the transfer of stocks
and assets located in England, France and the United States. A dispute arose
between the parties' accountants as to bow to calculate the final purchase
price. Although Defendant sent a letter seeking to invoke an arbitration clause
in the Acquisition Agreement, (fn25) less than a week later, Plaintiffs filed
suit in the United States District Court for the District of Connecticut.
Defendant filed an answer and several affirmative defenses but simultaneously
moved to stay the action pending arbitration. The motion was granted.
Several requirements are generally recognized as necessary to create an
enforceable arbitration agreement. These are:
1. The agreement must be in writing. (fn26)
2. The agreement must deal with differences (past, present or future) that have arisen between the parties.
3. The differences must arise out of a defined legal relationship.
4. The subject matter of the dispute must be arbitrable under local law. (fn27)
5. The parties must have had capacity to contract when they agreed to arbitrate. (fn28)
6. There must be some indication the parties intended to be bound by the decision of the arbitrators.
7. The scope of the dispute being arbitrated should be spelled out sufficiently so it is clear the arbitrators have jurisdiction. (fn29)
Departures from standard arbitration clauses (fn30) are scrutinized very
carefully and the parties must be prepared to explain the reasons for these
differences. While arbitration clauses are liberally construed, (fn31) a liberal
construction cannot correct a fundamental error.
Plaintiffs in Solomat argued that the accountants were specifically appointed
not as "arbitrators" but as "experts": "Such firm shall act as experts and not
as arbitrators." Could the last three words be the parties' specific denial of
an agreement to arbitrate? The court was unmoved by this argument, because it
was plain that the parties intended the accountants to determine certain issues
finally, which is the very function of arbitrators. The court did not discuss
what the parties might have had in mind in specifying that the accountants were
to be experts rather than arbitrators, but perhaps it was that their role was to
be limited to preparation of the completion accounts and not to include
resolution of other matters; if so, however, in law they were "arbitrators" as
to preparation of the completion accounts. Whatever may have been intended, this
part of the clause is not a model of clarity.
The next issue was whether use of the word "may" instead of "shall" in the
dispute resolution clause made it permissive and not mandatory. (fn32) Failing
to make arbitration mandatory creates a "pathological" arbitration clause,
(fn33) because it cannot be determined whether the parties intended to create a
binding mechanism to resolve their dispute. (fn34) Given the strong public
policy in favor of arbitration, the court construed the word "may" as mandatory
in this context, because the contract manifested a clear intention that any
dispute had to be submitted to the "experts" for final and binding resolution.
(fn35)
B. Rosinka Joint Venture v. Williams. (fn36)
Plaintiff Senie Kerschner International Housing Limited, a Connecticut
corporation ("SKIHL"), and Zavet Ilycha, a Russian citizen who is not a party to
this suit, formed plaintiff Rosinka joint Venture, a registered Russian joint
venture ("Rosinka"), to construct 450 condominium units in
Krasnogorsk, Russia. Plaintiff Christopher Senie, a Connecticut citizen and a
member of the Connecticut bar ("Senie"), was the former Director General of
Rosinka and the principal shareholder of SKIHL.
Defendant Richard D. Williams was a Connecticut citizen who spent 90% of his
time working for Rosinka in Russia but also maintained a New Canaan address
where his wife lives. Plaintiffs claimed that Defendant conspired with Rosinka's
Deputy Director General to force Senie to resign as Director General of Rosinka
by threatening a strike and cutting off essential services to Senie's residence
at the project. Plaintiffs filed suit in Connecticut. Defendant moved to dismiss
on the ground of forum non conveniens. The court denied the motion, holding that
"Defendant has failed to rebut the very strong presumption in favor of a
plaintiff who utilizes the court system of his own state." (fn37)
The court began its discussion by noting that the common law allows a plaintiff
to choose his forum and that the plaintiffs choice will not be disturbed unless
the balance is strongly in favor of the defendant. (fn38) The court then
followed the standard four step analysis: (fn39)
1. There must be an adequate alternative forum with jurisdiction over the
dispute. Ordinarily, this requirement will be satisfied when the defendant is
amenable to process in the other jurisdiction. (fn40) Although Plaintiffs
claimed the Russian judicial system was in "total and dismal disarray," they did
not claim that the relief sought was not available in Russia and judge Lewis
wisely chose not to pursue the point. Indeed, a contrary decision might have
created a diplomatic furor.
2. The court should consider all relevant factors of private interest, with a
strong presumption against disturbing the plaintiff's choice of forum. Again in
the standard analysis (fn41) the court must weigh six factors in this step:
(1) the relative ease of access to sources of proof;
(2) the availability of compulsory process for attendance of unwilling witnesses and the cost of obtaining attendance of willing witnesses;
(3) the possibility of viewing the accident (fn42) scene if such viewing is appropriate to the action;
(4) the enforceability of a judgment;
(5) the relative advantages and obstacles to a fair trial; and (6) all other practical problems that make trial of a case easy, expeditious, and inexpensive.(fn43)
Considering the modem realities of jet travel, videotaped depositions and the
like to gather evidence, judge Lewis held that the balance of private factors
tipped slightly in Plaintiffs' favor, (fn44) making it unnecessary to reach the
third and fourth steps:
3. If the balance of private factors is equal, then the court should consider
whether any public interest tips the balance towards the foreign forum.
4. If the public interest does tip the balance toward the foreign forum, the
original court must make sure the plaintiff can reinstate his suit in the
alternative forum without undue inconvenience or prejudice.
C. LeaseComm Corp. v. Forrest. (fn45)
LeaseComm Corp. v. Forrest has been mentioned in previous years because of
interlocutory opinions. (fn46) The present opinion follows a trial on the merits
in Massachusetts, in which plaintiff LeaseComm obtained a judgment against
defendant Forrest. Plaintiff sued to enforce the judgment in Connecticut at
common law. Defendants claimed the Uniform Foreign Money-judgments Recognition
Act (fn47) was applicable and prevented recognition of the judgment.
Judge Dorsey said the Uniform Foreign Money-judgments Recognition Act was not
applicable, without stating why, but the reason is clear from the text of the
statute: the Uniform Foreign Money-judgments Recognition Act applies only to
judgments issued by non-United States courts, not to those of the courts of
sister states, such as Massachusetts. (fn48)
The applicable statute for enforcement of the judgment would be the Uniform
Enforcement of Foreign judgments Act, (fn49) assuming it was not obtained by a
default in appearance or by a confession of judgment. Otherwise, the only
available option is a common law suit on a judgment.
D. Downes v. Ryobi America Corp. (fn50)
Plaintiff Randolph S. Downes was injured by a radial saw manufactured by Ryobi
Limited, a Japanese corporation, which had no direct contacts with either the
United States in general or Connecticut in particular. Plaintiff instituted suit
in Connecticut Superior Court against Ryobi Limited and others. Ryobi Limited
was served by certified mail pursuant to Connecticut General Statutes § 33-411.
Defendant Ryobi Limited objected to service by mail and claimed the Hague
Convention on the Service of Process Abroad (fn51) was applicable. Neither the
court nor the parties discussed Connecticut General Statutes § 52-59d, which
became effective October 1, 1991., (fn52)
Article 10 of the Hague Convention (fn53) has three subclauses, to which the
Government of Japan "objected," i.e., declined to be bound by, the second and
third. The subclauses to which Japan objected mention "service of judicial
documents," whereas the subclause that is in force for Japan refers only to "the
freedom to send judicial documents, by postal channels, directly to persons
abroad." Courts in the United States have divided on whether this means that
Japan will allow service of process by mail or merely provides a method for
sending subsequent documents after service of process has been obtained in
accordance with Japanese law. (fn54)
Noting that Article 200(c) of the Japanese Code of Civil Procedure requires
Japanese domestic service of process to be made through the court clerk, Judge
Fuller reasoned, correctly in our view, that Japan would be unlikely to have
intended to allow service of process by mail simply because there is a foreign
plaintiff in the lawsuit; if anything, Japan might insist on a higher level of
protection for its citizens.
Litigators undoubtedly will get used to using the Hague Convention on Service of
Process Abroad. The courts will get used to applying it, including its
codification in Connecticut law. (fn55) The next step will come in the
application of the Hague Convention on Taking Evidence Abroad. (fn56)
E. Calan v. Fogarty. (fn57)
This appeared to be a "garden variety" landlord-tenant dispute about a security
deposit. Defendants leased to Plaintiffs certain premises in Darien,
Connecticut. In July 1992, Plaintiffs vacated the premises and demanded their
security deposit. The security deposit was not returned or accounted for as
required by statute, so Plaintiffs sued for twice the value of their deposit,
pursuant to Connecticut General Statutes § 47a-21(d)(2), in the Norwalk Housing
Session of Superior Court.
Because Defendants were domiciled in Paris, France, Plaintiffs instituted this
suit pursuant to Connecticut General Statutes § 52-68(a), (fn58) by mailing the
writ, summons and complaint to Defendants through both regular and certified
mail, return receipt requested. The sheriff's affidavit of return included the
return receipt, evidencing actual receipt by Defendants.
Defendants moved to dismiss the complaint on the ground that it was not served
pursuant to Connecticut General Statutes § 52-59b(c), which calls for service on
the Secretary of the State. (fn59) It would have been interesting if Defendants
had argued this statute violated the Hague Convention on the Service of Process
Abroad. (fn60) Defendants failed to mention Connecticut General Statutes §
52-59d(a). (fn61)
Defendants attached to their brief a copy of the Hague Convention on service of
process abroad from the Martindale Hubbell Law Digest, but the Court did not
understand the significance of the Convention to this case. (fn62) Counsel
did not assist the court by citing any Connecticut or other precedent, (fn63) so
it is not surprising the court denied their motion to dismiss. (fn64)
________________
Footnotes
*. Of the Meriden Bar, formerly Chair of the Connecticut Bar Association's
Section of International Law and World Peace.
**. Vice President and General Counsel, Equator U.S.A. Incorporated,
Glastonbury.
1. Lowry & Schroth, Survey of 1992 Developments in International Law in
Connecticut, 67 CONN. B. J. 141 (1993) (hereinafter "1992 Survey").
2. Typical terms designating public corporations, the shares of which are
readily a transferable, are societe anonyme (SA), sociedad anonima (SA),
sociedade anonima (SA), Aktiengesellschaft or anonyme Gesellschaft (AG), Societa
per Azioni (SpA), naamloze vennootschap (NV), public limited company (PLC).
Typical terms designating private corporations, in which the ownership interests
are not readily transferable, are societe [de personnes] a responsabilite
limitee (SARL or SPRL) sociedad de responsabilidad limitada (S. de R.L. or SL),
sociedade por quotas [cotas] de responsablilidade limitada or sociedade por
quotas (Ltda. or Lda), Gesellschaft mit beschrankter Haftung (GmbH),
societa a responsabilita limitata (SARL), besloten vennootschap (BV), limited
company (Ltd.). Noted, however, that may Anglophone countries do not yet
distinguish between public and private companies, continuing to use "Limited"
for stock companies.
In some Anglophone countries, such as Australia, Nigeria and South Africa,
companies may be "private" or "proprietary" (in some systems abbreviated "Pty").
Private companies may be exempt from certain requirements, such as public
disclosure of their annual financial statements, and enjoy tax advantages, but
often the form is not available to foreign investors.
3. It may be worthwhile to remind readers that the limited liability of
corporations has not always been a principle of either English of American law,
but rather is something that developed mainly in the nineteenth century. This
history is discussed by Dean Phillip I. Blumberg in his recent book, THE
MULTINATIONAL CHALLENGE TO CORPORATION LAW 3-20 (1993).
4. P.A. 93-267. See Convicer, The Proposed Connecticut Limited Liability Act: A
Flexible Entity for Conducting Business, 3 Conn. Law., No. 4, at 14 (Dec.
1992-Jan. 1993); Limited Liability Company Act Becomes Law, 4 Conn. Law., No. 1,
at 18 (Sept. 1993); Important Notice to Practitioners From the CBA Tax Section's
LLC Subcommittee. LLC Alert, 4 Conn. Law., No. 3, at 7 (Nov. 1993).
5. In 1977, Wyoming became the first state to pass a limited liability company
act. Florida was next in 1982. In 1990, after the Revenue Ruling cited in note 6
infra, Colorado and Kansas enacted similar laws. From there, the growth has been
tremendous.
This growth has produced a corresponding proliferation of books, law review
articles, etc. Some of these are R.M. MULE, B.W. DIXON, R.T. KEPPELMAN & P.C.
VANCE, THE NEW CONNECTICUT LIMITED LIABILITY COMPANY ACT (printed materials and
audiotapes CBA-CLE 1993); P.L. BEHLING, N. FLEMING & S.R. THOMAS, LIMITED
LIABILITY COMPANIES IN CONNECTICUT (printed materials and audiotapes,
Professional Education Systems, Inc. 1993); FORMING AND USING LIMITED LIABILITY
COMPANIES AND LIMITED LIABILITY PARTNERSHIPS (Practicing Law Institute 1994);
R.W. WOOD, LIMITED LIABILITY COMPANIES: FORMATION, OPERATION AND CONVERSION
(Wiley 19M); M.A. SARGENT, LIMITED LIABILITY COMPANY HANDBOOK (Clark Boardman
Callaghan 1992); W.D. BADGLEY & P.P. WHYNOTT, THE LIMITED LIABILITY COMPANY
(James Publishing, Inc., annually supplemented looseleaf, 1991); LIMITED
LIABILITY COMPANY REPORTER bimonthly newsletter edited by Badgley & Whynott,
1993-); M.A. BAMBERGER & A.J. JACOBSON, STATE LIMITED LIABILITY COMPANY LAWS
(Prentice Hall 1994), Keatinge et el, The Limited Liability Company: A Study of
the Emerging Entity, 47 BUS. LAW. 378 (1992).
6. I.R.C. §§701-755; Treas. Reg. §301.7701-2(a)(3); Rev. Rul. 88-76,1988-2 C.B.
360.
7. Compare I.R.C. §N 1361-1319 (Subchapter S).
8. Section 2(16) defines professional service as:
any type of service to the public which requires that members of a profession
rendering such service obtain a license or other legal authorization as a
condition precedent to the rendition thereof, limited to the professional
services rendered by dentists, natureopaths, osteopaths, chiropractors,
physicians and surgeons, doctors of dentistry, physical therapists, occupational
therapists, Podiatrists, optometrists, nurses, veterinarians, pharmacists,
architects, professional engineers, or jointly by architects and professional
engineers landscape architects, certified public accountants and public
accountants, surveyors, psychologists and attorneys-at-law.
9. CONN. GEN. STAT. §33-182a et seq., as amended by P.A. 91-324. See Lowry &
Schroth, Survey of 1991 Developments in International Law in Connecticut, 66
CONN. B.J. 64, 70-74 (1992) (hereinafter "1991 Survey").
10. In particular, foreign legal consultants ?lawyers licensed by foreign
countries) can form LLCs with Connecticut attorneys.
11. P.A. 93-85.
12. Senate Treaty Document 103-10,1511 U.N.T.S. _ (Registration Nos. 26119 and
26120, respectively).
13. After the Senate Foreign Relations Committee held a public hearing on
October 26, 1993, the Convention was reported to the full Senate on November 18,
1993. The Senate gave its advice and consent on November 20, 1993.
The instrument of ratification was deposited by President Clinton on May 5,
1994. "U.S. CONST. art. VI.
15. Statute of limitations in contracts for sale. (1) An action for breach of
any contract for sale must be commenced within four years after the cause of
action has accrued. By the original agreement the parties may reduce the period
of limitation to not less than one year but may not extend it.
(2) A cause of action accrues when the breach occurs, regardless of the
aggrieved party's lack of knowledge of the breach. A breach of warranty
occurs when tender of Delivery is made except that where a warranty explicitly
extends to future performance of the goods and discovery of the breach must
await the time of such performance the cause of action accrues when the breach
is or should have been discovered.
(3) Where an action commenced within the time limited by subsection (1) is so
terminated as to leave available a remedy by another action for the same breach,
such other action may be commenced after the expiration of the time limited and
within six months after the termination of the first action unless the
termination resulted from voluntary discontinuance or from dismissal for failure
or neglect to prosecute.
(4) This section does not alter the law on tolling of the statute of limitations
nor does it app to causes of action which have accrued before October 1,
1961.
16. CONN. GEN. STAT. § 42a-2-725, quoted in the preceding note.
17. According to the American Bar Association report on the 1974 Convention to
the House of Delegates, the statute of limitations applicable to actions for
breach of contracts for the sale of goods can range from six months to thirty
years in different countries. 24 INT'L LAW. 584 (1990).
18. This principle was accepted in the RESTATEMENT OF CONFLICTS OF LAW. It was
changed in the RESTATEMENT (SECOND) OF CONFLICTS OF LAW, which adopted a
substantial contacts approach. The "substantial contacts" approach depends
heavily on a factual analysis, making it very hard to predict the outcome
accurately. States within the United States are generally moving away from the
approach of the first Restatement to the approach in the Restatement (Second).
This makes it harder to predict what law will be applied by the forum, even
strictly within the United States. The National Conference of Commissioners on
Uniform State Laws tried to address the problem with the Uniform Conflicts of
Laws-Limitations Act, but it has been adopted in only a handful of states.
19. Normally a forum will not apply the choice-of-law rules of another forum.
20. E.g.: minority of the potential plaintiff.
21. E.g. if the court determines that the potential plaintiff has become
incompetent.
22. 19 I.L.M. 668 (also reprinted in MARTINDALE-HUBBELL LAW DIRECTORY referred
to as the "CISG Convention" or the "Vienna Convention on the Sale of Goods. The
United States is a arty to CISG Convention. As Connecticut practitioners are of
course aware, a choice of Connecticut law in a contract for the sale of goods
between a Connecticut party and a party in a country that has ratified the CISG
Convention (such as Canada, France or Germany) is a choice of the CISG
Convention's rules rather than those of the Uniform Commercial Code, as provided
in Article 1(1) of the CISG Convention. See generally H. GABRIEL, PRACTITIONER'S
GUIDE TO THE CISG & UCC (Oceana 1994).
23. Certain transactions were expressly excluded from the 1974 Convention. It
was felt some of these classes were important enough to be regulated by national
law, because there was little risk of forum shopping (such as consumer
transactions), because the area was already comprehensively regulated (such as
the sale of vessels or ships) or because the transaction did not involve goods
(such as the sale of electricity). These are the same transactions excluded
under the CISG Convention.
24. United States District Court for the District of Connecticut, Civil Action
No. 3:93CV-00154(AHN). Decision of Magistrate Margolis dated May 17,1993. This
decision was affirmed by Judge Nevas.
25. The arbitration clause read:
If there is any dispute with respect to the preparation of the completion
accounts ... then either party may refer the matter for final settlement to a
firm of chartered accountants with offices in England, the United States and
France nominated jointly by the vendor and the purchaser. Or failing such
nomination within fourteen days after request by either the vendor or the
purchaser nominated at the request of either such party, by the President for
the time being of the Institute of Chartered Accountants in England and Wales.
Such firm shall act as experts and not as arbitrators. Their decision shall (in
the absence of manifest error) be final and binding on the parties and their
fees for so acting shall be borne and paid by the Warrantors and the purchaser
in such proportions as the firm shall decide.
26. Morganti v. Boehringer, 20 Conn. App. 67 (1989), CONN. GEN. STAT. §§ 52-408,
50,-107 anT9 U. S.C. § 2.
27. Disputes under purchase and sale contracts are arbitrable, particularly if
the transactions are international. Even claims of securities fraud are
arbitrable. Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974).
28. A. Dubreuil & Sons, Inc. v. Lisbon, 215 Conn. 604 (19%).
29. Gary Excavating v. North Haven, 164 Conn. 119 (1972).
30. The American Arbitration Association's standard arbitration clause:
Any controversy or claim arising out of or relating to this contract, or the
breach ' shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof.
The Chartered Institute of Arbitrators' standard arbitration clause:
Any dispute arising out of or in connection with this contract shall be referred
to finally resolved by arbitration under the Rules of the Chartered Institute of
Arbitrators, which Rules are deemed to be incorporated by reference into this
clause.
The Inter-American Arbitration Commission's standard arbitration clause:
Any dispute, controversy, or claim arising out of or relating to this contract
or the breach, termination, or invalidity thereof shall be settled by
arbitration in accordance with the Rules of Procedure of the Inter-American
Commercial Arbitration Commission in effect on the date of this agreement. [The
arbitral tribunal shall decide as amiable compositeur or ex aequo et bono.]
Note: Parties may wish to consider adding:
a) The number of arbitrators shall be_________ (one or three).
b) The place of arbitration shall be_______ (town or country).
(c) The language(s) to be used in the arbitral proceedings shall be_____.
The London Court of International Arbitration's standard clause:
Any dispute arising out of or in connection with this contract, including any
question regarding its existence, validity or termination, shall be referred to
N finally resolved by arbitration under the Rules of the London Court of
International Arbitration, which Rules are deemed to be incorporated by
reference into this clause.
31. Middletown v. Police Local No. 1361, 187 Conn. 228 (1982).
32. Block 175 Corp. v. Fairmont Hotel Management Co., 648 F. Supp. 450 (D. Colo.
1986), and Cravat Coal Export Company v. Taiwan Power Company, United States
District Court for the Eastern District of Kentucky, Civil Action 90:11 (March
5, 1990).
33. The idea of "pathological" arbitration clauses was first discussed by
Frederic Eisemann of the International Chamber of Commerce's Court of
Arbitration in 1974. Pathological Clauses: Frederic Eisemann's Still Valid
Criteria, 7 ARBITRATION INTERNATIONAL 365 (1991).
34. If the parties created a binding mechanism, then they have agreed to
arbitrate.
35. This is plainly the correct result on the facts but an alternative rationale
may be referable. The words "either party may 11 give either party an option to
make a decision binding on the other and in that sense create a binding
mechanism. Thus there was no flaw in this part of the arbitration clause and no
need to interpret "may" as "shall."
36. 10 Conn. L. Rptr. 63 (Super. Ct. 1993).
37. 10 Conn. L. Rptr. at 65.
38. Citing Picketts v. International Playtex, Inc., 215 Conn. 490, 500 (19M
39. See Miller v. United Technologies Corp. 40 Conn. Sup. 457, 460, 515 A.2d 390
(1986); Pain v United Technologies Corp., 637 F.2d 775, 784-85 (D.C. Cir. 1980),
cert. denied 454 U.S. 1128 (1981), La Seguridad v. Transytur Line, 707 F.2d
1304,1307 (11th Cir. 1983); Carnival Cruise Lines Inc. v. Oy Wartsila Ab, 159
B.R. 984, 989-990 (S.D. Fla. 1993).
40. Gulf Oil Corp. v. Gilbert, 330 U.S. 501,506-07 (1947).
41. See supra note 39.
42. Other courts omit the word "accident": a view of the scene or property may
be relevant in cases not involving accidents.
43. Miller v. United Technologies Corp., supra note 39, at 463.
44. Defendant claimed this dispute had to be settled by arbitration in Stockholm
(a common provision in joint ventures involving Russia). However, Defendant had
not yet given the court enough information-such as a copy of the contract
containing the arbitration clause- to allow an order compelling arbitration to
issue pursuant CONN. GEN. STAT. § 50a-108, which reads:
Arbitration agreement and substantive claim before court. (1) A court before which n action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.
45. 1993 Conn. Super. LEXIS 2502 (Sept. 23,1993).
46. Judge Dorsey had seemed to suggest in LeaseComm Corp. v. Forrest, 1992 Conn.
Super. LEXIS 2990 (Oct. 14, 1992), that Massachusetts was a foreign state. See
1992 Surv7bsou,P,ra note 1, at 151 n. 44.
47. Conn. GEN. STAT. §50a-34.
48. CONN. GEN. STAT. §50a-31 (formerly 52-611):
Definitions. As used in §§50a-30 to 50a-38, inclusive:
(1) Foreign state means any governmental unit other than the United States or
any state, district, commonwealth, territory or insular possession thereof.
[Emphasis added.]
49. CONN. GEN. STAT. § 52-607. It is conceded the acts have confusingly similar
names.
50. 1993 Conn. Super. LEXIS 640 (March 12, 1992).
51. 20 U.S.T. 361, T.I.A.S. 6638, 658 U.N.T.S. 163 (Feb. 10, 1969).
52. Sec. 52-59d. Service of process outside country to be in accordance with
treaty or convention or court order. (a) Notwithstanding any provision of the
general statutes relating to service of process, civil process shall not be
served outside of the United States of America in violation of any applicable
treaty or convention, including without limitation, the Hague Convention on
Service of Process Abroad.
(b) If service of process cannot be made under the applicable treaty of
convention within sixty days, the superior court may, upon application, order
service of process upon such terms as the court deems reasonably calculated to
give the defendant actual notice of the proceedings in sufficient time to enable
the defendant to defend.
See 1991 Survey, supra note 9, at 65-68.
53. Provided the State of destination does not object, the present Convention
shall. not interfere with-
(a) the freedom to send judicial documents, by postal channels, directly to
persons abroad.
(b) the freedom of judicial officers, officials or other competent persons of
the State of origin to effect service of judicial documents directly through the
judicial officers, officials or other competent persons of the State of
destination.
(c) the freedom of any person interested in a judicial proceeding to effect
service of judicial documents directly through the judicial officers, officials
or other competent persons of the State of destination.
54. The court cited six decisions on each side.
55. Including CONN. GEN. STAT. 52-59d(a).
56. 23 U.S.T. 2555, T.I.A.S. No. M4 (March 18,1970).
57. 1993 Conn. Super. LEXIS 887 (April 18,1993).
58. Which provides:
Notice to nonresident adverse or interested parties and interested parties
unknown to plaintiff.
(a) The superior court, and the judges, clerks and assistant clerks thereof may
except where it is otherwise specially provided by law, make such order as is
deemed reasonable, in regard to the notice w shall be given of the institution
or pendency of an complaints, writs of error and appeals from probate, which may
be brought to or pending in the superior court, when the adverse party, or any
persons so interested therein that they ought to be made parties thereto, reside
out of the state, or when the names or residences of any such persons in
interest are unknown to the party instituting the
proceeding.
(b) Such notice, having been given and proved by the affidavit of the officer
who hall be deemed sufficient service and notice, and the court may
proceed to a hearing, unless otherwise provided by law, or may order further
notice as it deems reasonable. [Emphasis added.]
59. (c) Any nonresident individual, or foreign partnership, or his or its
executor or administrator, over whom a court may exercise personal jurisdiction,
as provided in subsection (a), shall be deemed to have appointed the secretary
of the state as its attorney and to have agreed that any process in any civil
action brought against the nonresident individual or foreign partnership, or his
or its executor or administrator, may be served upon the secretary of the state
and shall have the same validity as if served upon the nonresident individual or
foreign partnership personally. The process shall be served by the officer to
whom the same is directed upon the secretary by leaving with or at the office of
the secretary, at least twelve days before the return day of such process, a
true and attested copy thereof, and by sending to the defendant at his
last-known address, by registered or certified mail, postage prepaid, a like,
true and attested copy with an endorsement thereon of the service upon the
secretary. The officer serving such process upon the secretary shall leave with
the secretary, at the time of service, a fee of twenty-five dollars, which fee
shall be taxed in favor of the plaintiff in his costs if he prevails in any such
action. The secretary of the state shall keep a record of each such process and
the day and hour of service.
60. Volkswagenwerk Aktiengesellschaft v. Schlunk, Administrator, 486 U.S. 694
61. See supra note 52.
62. In fact, Judge Melville made his displeasure at this "parenthetical"
unexplained reference rather clear in the opinion.
63. Not even Volkswagenwerk supra note 60, which made it very clear this kind of
service of process was not allowed under the convention.
64. This decision seems to go against the weight of authority in the Connecticut
Superior Court: Montalvo v. Nutmeg Foods, 2 CSCR 760 (1987) (Harrigan, J.);
Cardillo v. KIS France, 2 CSCR 1188 (1987) (Cioffi, J.); Bourquin, Administrator
v. Melsungen AC, 3 CSCR 803 (Hennessey, J); and Downes, et al. v. Ryobi America
Corporation, et al., 1993 Conn. Super. LEXIS 640 (March 12, 1992) (Fuller, J.).
As to Downes, see supra notes 50-54 and accompanying text.