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transportation of mail (Luckenbach Steamship Co. v. U.S., 280 U.S. 173 (1930)).
None of these determinations for purposes of domestic law determine or are intended to affect the international status of the Canal Zone. The plenary legislative authority of the Congress over the Canal Zone is derived from our rights under article III of the 1903 Treaty to act as if sovereign. Thus, the Court's recognition that Congress has jurisdiction to legislate for the area is consistent with the status of the Canal Zone as territory of Panama under the jurisdiction of the U.S.
Dept. of State File No. P76 0061-2133. Article III of the U.S.-Panama treaty of 1903 (33 Stat. 2234; TS 431; 10 Bevans 663) provides:
The Republic of Panama grants to the United States all the rights, power and authority within the zone mentioned and described in Article Il of this agreement and within the limits of all auxiliary lands and waters mentioned and described in said Article II which the United States would possess and exercise if it were the sovereign of the territory within which said lands and waters are located to the entire exclusion of the exercise by the Republic of Panama of any such sovereign rights, power or authority.
The U.S. Senate, on July 26, 1976, unanimously agreed to a resolution (S. Res. 319) expressing the sense of the Senate that "the signing in Helsinki of the Final Act of the Conference on Security and Cooperation in Europe did not change in any way the longstanding policy of the United States on nonrecognition of the illegal seizure and annexation by the Soviet Union of the three Baltic nations of Estonia, Latvia, and Lithuania.” The text of the resolution follows:
Whereas the three Baltic nations of Estonia, Latvia, and Lithuania have been illegally occupied by the Soviet Union since World War II; and
Whereas the Soviet Union appears to interpret the Final Act of the Conference on Security and Cooperation in Europe, signed at Helsinki, as giving permanent status to the Soviet Union's illegal annexation of Estonia, Latvia, and Lithuania, and
Whereas, although neither the President nor the Department of State issued a specific disclaimer in conjunction with the signing of the Final Act at Helsinki to make clear that the United States still does not recognize the forcible conquest of those nations by the Soviet Union, both the President in his public statement of July 25, 1975, and the Assistant Secretary of State for European Affairs in his testimony before the Subcommittee on International Political and Military Affairs of the House Committee on International Relations stated quite explicitly that the longstanding official policy of the United States on nonrecognition of the Soviet Union's forcible incorporation and annexation of the Baltic nations is not affected by the results of the European Security Conference: Now, therefore, be it
Resolved, That, notwithstanding any interpretation which the Soviet Union or any other country may attempt to give to the Final Act of the Conference on Security and Cooperation in Europe, signed in Helsinki, it is the sense of the Senate (1) that there has been no change in the longstanding policy of the United States on nonrecognition of the illegal seizure and annexation by the Soviet Union of the three Baltic nations of Estonia, Latvia, and Lithuania, and (2) that it will continue to be the policy of the United States not to recognize in any way the annexation of the Baltic nations by the Soviet Union.
Cong. Rec., Vol. 122, No. 112, July 26, 1976, p. S12516 (daily ed.). For the text of the Final Act of the Conference on Security and Cooperation in Europe (CSCE), signed at Helsinki on Aug. 1, 1975, by representatives of 35 states, including the United States, see Dept. of State Bulletin, Vol. LXXIII, No. 1888, Sept. 1, 1975, pp. 323-350.
Berlin The Embassy of the Soviet Union, in a note dated April 6, 1976, to the Department of State, protested that the application to Berlin (West) of the Treaty on the Prohibition of the Emplacement of Nuclear Weapons and Other Weapons of Mass Destruction on the Seabed and the Ocean Floor (TIAS 7337; 23 UST 701) by the Federal Republic of Germany was unlawful and a violation of the Quadripartite Agreement (TIAS 7551; 24 UST 285). The note was in response to a depositary communication from the Department of State that the Federal Republic of Germany had deposited its ratification of the treaty on November 18, 1975, with application to Berlin (West).
The Department of State sent a reply note to the Embassy of the Soviet Union on August 4, 1976, on behalf of the Governments of the United States, the United Kingdom, and France, in which it stated:
In a communication to the Government of the Union of Soviet Socialist Republics which is an integral part (Annex IV A) of the Quadripartite Agreement of September 3, 1971, the three powers confirmed that, provided matters of security and status are not affected and provided the extension is specified in each case, international agreements and arrangements entered into by the Federal Republic of Germany may be extended to the Western Sectors of Berlin in accordance with established procedures. For its part, the Government of the Union of Soviet Socialist Republics, in a communication to the Governments of the three powers, which is similarly an integral part (Annex IV B) of the Quadripartite Agreement of September 3, 1971, affirmed that it would raise no objection to such extension.
The established procedures referred to above, which were endorsed in the Quadripartite Agreement, are designed, inter alia, to afford the authorities of the three powers the opportunity to ensure that the treaties concluded by the Federal Republic of Germany which are to be extended to the Western Sectors of Berlin are extended in such a way that matters of security and status are not affected. When authorizing the extension of the Treaty on the Prohibition of the Emplacement of Nuclear Weapons and Other 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).
Extraterritoriality 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. ...
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.
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.