July 15, 2010
Rau on Primary Jurisdiction
Prof. Alan Rau (Texas) has posted on SSRN his article, Understanding (and Misunderstanding) 'Primary Jurisdiction', which is forthcoming in the American Review of International Arbitration. Here’s the abstract:
In our “Westphalian” regime of international arbitration, conflict and competition between national jurisdictions, with overlapping and yet plausible claims to supervise the process, become inevitable. The conventional starting point for any discussion - the fulcrum around which the entire arbitral enterprise pivots - has been the supposed dichotomy between the state of the “seat” - where the arbitration finds its juridical “home,” and whose jurisdiction over the process is therefore “primary” - and all other states whose jurisdiction must therefore be deemed only “secondary.” Both legislation and Convention envisage an exclusive role for the former in setting the process in motion - for example, by appointing the arbitrators - and above all in monitoring compliance with the agreement - for example, by annulling or vacating the resulting award.
That the “seat” is the privileged starting point with respect to any allocation of judicial authority has traditionally been a simple reflection of the power of any sovereign over acts taking place within its “territory”; an alternative and perhaps more robust explanation would be somewhat more “contractualist,” giving priority to the parties’ exercise of autonomy in the very act of selecting the place of arbitration - and to the intuition that, by extension, they have presumptively chosen to subject themselves both to a certain body of “arbitration law,” and to the supervisory jurisdiction of the courts charged with applying that law.
I begin by canvassing the various fact patterns in which the traditional allocation of international competence on the basis of “primary” and “secondary” jurisdiction might possibly be thought useful: It has become, for example, the heuristic of choice to test the extraterritorial effect of an award, in circumstances where the agreement of the parties has subjected the arbitral process to a particular legal system whose own courts have found it lacking in legitimacy. All this is much controverted, but generally well understood.
The inevitable problem, though, is that none of this is a universal solvent - the world can after all be understood and patterned and divided up in all sorts of ways. What may have begun as a rough attempt to allocate responsibility over the unfolding of the process, has often been unthinkingly applied to all sorts of new and unexpected and inappropriate contexts.
Where, for example, a party has asked a court to enjoin an arbitration against him that has been threatened or initiated - perhaps on the fundamental ground that he has never even given his assent - American courts will increasingly hold that, whatever power they might have to enjoin a “local” arbitration, it would be “inconsistent with the purpose of the New York Convention” to enjoin arbitral proceedings in a state of “secondary jurisdiction” - and thus they “lack jurisdiction” to do so. Where a party has claimed that a foreign award has been obtained by bribery and corruption, and wishes to institute a “collateral attack” in this country through a RICO action, it may equally be held that the court lacks “subject matter jurisdiction” to reassess an award rendered in a state of “primary jurisdiction”; “under the framework of the New York Convention, the proper method of obtaining this relief is by moving to set aside or modify the award in a court of primary jurisdiction.”
American courts thus seem curiously mesmerized, when asked to deploy familiar procedural devices in aid of their nationals, by a rhetoric invented for quite different purposes. What purports in cases like these to be a commendable solicitude for the needs of international arbitration, takes the form of an abdication of any decision making power whatever, in favor of the courts of the seat. To invoke a putative lack of “power” based upon absolute prohibitions that supposedly emanate from the Convention seems a crude and clumsy and overbroad and irresponsible way of responding; even a legal system quite committed, for example, to the proposition that attempts to evade the arbitral process are likely to be quite without merit - or for that matter to the proposition that international neutrals cannot possibly be corrupt - need not shrink, on the prophylactic grounds of lack of jurisdiction, from testing any challenges.
July 12, 2010
Craig on Due Process Challenges in Environmental & Natural Resources Law
Robin Kundis Craig (Florida State University College of Law) has posted "Due Process Challenges in Environmental and Natural Resources Law" on SSRN.
The abstract states:
Music Industry's $675K Judgment Against File-Sharing College Student Reduced as Unconstitutionally Excessive
In a closely-watched federal lawsuit brought by several major recording companies, U.S. District Judge Nancy Gertner has reduced a damage award against a defendant who illegally downloaded 30 songs when he was in college. The case is Sony BMG Music Entertainment v. Tenenbaum, 07cv11446-NG (D. Mass. July 9, 2010).
Judge Gertner’s opinion begins: “This copyright case raises the question of whether the Constitution’s Due Process Clause is violated by a jury’s award of $675,000 in statutory damages against an individual who reaped no pecuniary reward from his infringement and whose individual infringing acts caused the plaintiffs minimal harm. I hold that it is.” Here’s more from the opinion’s introduction:
Joel Tenenbaum (“Tenenbaum”), the defendant in this action, was accused of using filesharing software to download and distribute thirty copyrighted songs belonging to the plaintiffs. The plaintiffs are a group of the country’s biggest recording companies. Their lawsuit against Tenenbaum is one of thousands that they have brought against file sharers throughout the country. Tenenbaum, like many of the defendants in these suits, was an undergraduate when his file-sharing was detected.
Although the plaintiffs presented evidence that Tenenbaum illegally downloaded and shared thousands of recordings, the trial focused on his infringement of the plaintiffs’ copyrights in thirty songs. As to these songs, Tenenbaum’s liability for infringement was not seriously in question. . . . The only questions for the jury were whether Tenenbaum’s infringements were willful and what amount of damages was appropriate. . . . The jury did find that Tenenbaum willfully infringed the plaintiffs’ copyrights and imposed damages of $22,500 per song, yielding a total award of $675,000.
. . .
I conclude that the jury’s award of $675,000 in statutory damages for Tenenbaum’s infringement of thirty copyrighted works is unconstitutionally excessive. This award is far greater than necessary to serve the government’s legitimate interests in compensating copyright owners and deterring infringement. In fact, it bears no meaningful relationship to these objectives. . . . It cannot withstand scrutiny under the Due Process Clause.
For the reasons I discuss below, I reduce the jury’s award to $2,250 per infringed work, three times the statutory minimum, for a total award of $67,500. Significantly, this amount is more than I might have awarded in my independent judgment. But the task of determining the appropriate damages award in this case fell to the jury, not the Court. I have merely reduced the award to the greatest amount that the Constitution will permit given the facts of this case.
(Hat Tip: Howard Bashman)