Litigation against foreign sovereigns received a boost from yesterday’s SCOTUS ruling allowing discovery against foreign sovereigns to find assets for potential execution by a judgment creditor, as described in an alert by Weil. The ruling provides a fresh catalyst for more global litigation of all kinds, including more tort claims against foreign sovereigns.

Today, niche litigation creates an amazing three-dimensional chess board for moves and counter-moves. For example, Russia has now lost two international arbitrations regarding its appropriation of Yukos through ginned up tax bills. Covington’s cogent press release effectively tells the story of this single arbitration. The arbitration award is here

End of story? No. The larger story is well-told by Michael Goldhaber in an American Lawyer post. In short, the outcomes to date are preliminary thrusts in a larger chess game against Russia. The ultimate claimants are persons with huge stakes in Yukos. These small claims have allowed the opportunity to compile and present a trial story in small test runs instead of staking everything on one trial. 

The same principles apply in toxic tort litigation. A plaintiff’s firm with many mesothelioma cases can afford to try and lose some cases to get the case presentation just right. Then, once the case presentation is honed, the same script can be used again and again. 


"WASHINGTON, DC, July 26, 2012 — An international tribunal ordered the Russian government to compensate a group of Spanish investors for the losses they suffered when Russia seized the Yukos Oil Company, one of the largest oil and gas companies in the world. 

The Spanish investors sought compensation under the bilateral investment treaty between Spain and the Russian Federation. The panel ruled that the Russian government issued illegitimate tax bills and, through a series of enforcement actions and eventual bankruptcy, placed Yukos’ assets under state control. State-owned Rosneft and Gazprom received the vast majority of Yukos’ assets. The tribunal valued Yukos at more than $60 billion at the time the company was nationalized. 

“This case stands for an important principle: If Russia violates its treaty obligations and harms investors, there will be consequences,” said Marney Cheek, a partner at Covington & Burling LLP who represents the Spanish investors. “The panel’s decision holds Russia accountable and awards compensation to the former shareholders of Yukos.” 

The tribunal concluded “that Yukos’ tax delinquency was indeed a pretext for seizing Yukos assets and transferring them to Rosneft. . . . [T]his finding supports the Claimants’ contention that the Russian Federation’s real goal was to expropriate Yukos, and not to legitimately collect taxes.”

“This ruling vindicates the rights of Spanish investors, and, indeed, all investors in Yukos,” said Ms. Cheek. 

Thousands of investors worldwide owned shares in Yukos. This is the second ruling by an international tribunal holding that these investors are entitled to compensation. An investor from the United Kingdom prevailed in a similar proceeding in September 2010. 

The arbitration proceeding, Quasar de Valores SICAV S.A., et al. v. The Russian Federation, was filed in March 2007 under the jurisdiction of the Stockholm Chamber of Commerce. A tribunal of three distinguished jurists issued a unanimous award: Jan Paulsson (chair) of Freshfields Bruckhaus Deringer; Toby Landau QC, of Essex Chambers; and Judge Charles Brower of the Iran-United States Claims Tribunal. 

Covington & Burling and Spanish firm Cuatrecasas, Gonçalves Pereira represented Claimants. 

The Covington team included former partner O. Thomas Johnson, Jr., as well as Marney Cheek, Jonathan Gimblett, David Pinsky, Alexia DePottere-Smith, Alex Canizares, Fritz Scanlon, and Alex Berengaut. Mr. Johnson retired from Covington in April 2012." VICTORY FOR SPANISH FUNDS IN CLAIM AGAINST


Set out below is an ad I received for an interesting looking book on state liability claims. The topic to me is interesting because nations like China are so tied into many of its industrial businesses that are investing in Brazil and other nations, and no doubt have been or will be releasing toxins. Some of these businesses  inevitably will end up being identified as causes of personal injury and property damage claims, and probably will be sued in mass tort claims of the future. 


New Title from Hart Publishing

I am pleased to announce the publication of the title shown below. If you would like to order this title with your 10% discount you can do so through our website* (please mention ref: ‘E-MAIL LIST’ in the special instructions field) or you can complete and return the order form that is included at the bottom of this message.

*Please note the discount will not show up on your order confirmation but will be applied when the order is processed.


Now available in Paperback

State Liability in Investment Treaty Arbitration

Global Constitutional and Administrative Law in the BIT Generation

Santiago Montt


Reviews of the Hardback Edition

“… Montt has authored a thought-provoking and welcome contribution to the current literature on international investment law.”Valentina S. Vadi, Journal of International Economic Law


State Liability in Investment Arbitration is a valuable and truly interdisciplinary contribution to the growing body of literature on international investment law. It offers novel analytical approaches to analyzing the emergence and evolution of the BIT generation, and sheds light on some of the hitherto less explored issues of state liability for interference with foreign investment.” Mavluda Sattorova, Transnational Dispute Management


“The book is widely supported with authorities and references. In every subject, Montt excels at combining the historical perspective, the conceptual analysis and a critical look at the future. His work has an unquestionable intellectual and academic value. Were I to recommend it, then I would surely do to scholars and researchers.” Albert Badia, Journal of World Energy Law and Business


Today there are more than 2,500 bilateral investment treaties (BITs) around the world. Most of these investment protection treaties offer foreign investors a direct cause of action to claim damages against host-states before international arbitral tribunals. This procedure, together with the requirement of compensation in indirect expropriations and the fair and equitable treatment standard, have transformed the way we think about state liability in international law.


We live in the BIT generation, a world where BITs define the scope and conditions according to which states are economically accountable for the consequences of regulatory change and administrative action. Investment arbitration in the BIT generation carries new functions which pose unprecedented normative challenges, such as the arbitral bodies established to resolve investor/state disputes defining the relationship between property rights and the public interest. They also review state action for arbitrariness, and define the proper tests under which that review should proceed.


State Liability in Investment Treaty Arbitration is an interdisciplinary work, aimed at academics and practitioners, which focuses on five key dimensions of BIT arbitration. First, it analyses the past practice of state responsibility for injuries to aliens, placing the BIT generation in historical perspective. Second, it develops a descriptive law-and-economics model that explains the proliferation of BITs, and why they are all worded so similarly. Third, it addresses the legitimacy deficits of this new form of dispute settlement, weighing its potential advantages and democratic shortfalls.  Fourth, it gives a comparative overview of the universal tension between property rights and the public interest, and the problems and challenges associated with liability grounded in illegal and arbitrary state action. Finally, it presents a detailed legal study of the current state of BIT jurisprudence regarding indirect expropriations and the fair and equitable treatment clause.


Santiago Montt has a JSD and an LLM from Yale University, an MPP from Princeton University, and an LLB from Universidad de Chile, and has taught administrative law and international commercial arbitration at Universidad de Chile, and competition law at Universidad Diego Portales.


Click here for further information about the ‘Studies in International Law’ Series


Dec 2011   460pp   Pbk   9781849462136  US$ 50


Everything is relative in the world of injuries and torts. In the US, defendants and plaintiffs jockey back and forth, and lobby for state and federal changes in laws and/or members of the judiciary.   But, we do not have outright government censorship or reporters being blocked from investigating. Not so, it appears, in China, when it comes to reporting on defective vaccines. Reports came out in China last year on perhaps 100 children dying from improper vaccines administered in one particular program. Now,  reports say that the reporting journalists are facing government crackdowns and are being assigned to non-investigative work. The current story is set out below. 


"One of China’s leading newspapers has shut down its respected investigative unit, an editor said Tuesday, an apparent victim of a broad clampdown on political dissent and the media.

The sudden move has sparked concern about the future of watchdog journalism in China, which has gained strength in recent years despite a ruling Communist Party censorship system aimed at ensuring favourable media coverage for the government.

Xie Baokang, assistant to the editor-in-chief at the China Economic Times newspaper, told AFP the publication’s investigative team — led by veteran muckracker Wang Keqin — had been "dismantled."

"The correspondents haven’t left, they still work at the newspaper, but in different departments," he said, refusing to comment on the reasons behind the move.

The China Economic Times is published by an institution that comes under the central government but has still managed to push political boundaries, becoming one of the nation’s leading watchdog publications.

Wang’s report last year on children who fell seriously ill after being given allegedly faulty vaccines in the northern province of Shanxi made waves around the country.

Soon after that story, the paper’s editor-in-chief Bao Yueyang — a keen supporter of Wang — was sacked.

The Chinese government strictly censors the country’s newspapers, broadcast media and the Internet, blocking any information it deems a threat to its authority.

Controls have been further tightened by a heavy clampdown on dissent amid official fears that recent uprisings in the Middle East and North Africa could spark similar movements in China.

Scores of prominent rights lawyers and activists have been detained in the campaign.

David Bandurski, the Hong Kong-based co-author of a book on investigative journalism in China, said the newspaper’s move was a worrying development.

"Wang is the pre-eminent investigative reporter in China, he’s symbolic of the whole movement going back to the mid to late 1990s," he said.

"So what happens with this team will reflect on the overall environment for investigative reporting," he said.

Wang — who just recently offered a positive assessment of the growth in watchdog journalism on his blog — could not be reached by phone, and did not immediately respond to emails sent by AFP."


It seems inevitable that sovereign liability issues will continue to grow; several posts on this topic are indexed under  the heading  "sovereign."  Two new items caught my eye on sovereign-owned or supported entities.

First, note this NLJ article on decisions holding that FCPA  prosecutions are proper for bribes paid to business entities which are arguably owned or controlled by government entities. Second, consider the growing scale of global Chinese government investment in  businesses around the world, and how many entities may soon be considered sovereign-owned  or controlled. According to this recent NYT article about a new study on Chinese investment:

"Flush with capital from its enormous trade surpluses and armed with the world’s largest foreign exchange reserves, China has begun spreading its newfound riches to every corner of the world — whether copper mines in Africa, iron ore facilities in Australia or even a gas shale project in the heart of Texas.

The study, commissioned by the Asia Society in New York and the Woodrow Wilson Center for International Scholars in Washington, forecasts that over the next decade China could invest as much as $2 trillion in overseas companies, plants or property, money that could help reinvigorate growth in the United States and Europe."

 A National Law Journal article reports that the Chinese government has been hit with a default judgment in a tort case. Through  February 16 rulings in federal court in Los Angeles,  District Judge Josephine Tucker held that Solid Oak Software Inc. was entitled to a default in a suit alleging governmental theft of software code for use in suppressing Internet access.  According to the article by Amanda Bronstad, one of the lawyers for plaintiff  is Gregory Fayer of Gipson, Hoffman & Pancione in Los Angeles.  Ms. Bronstad also reports that the Chinese government was aware of the suit, but declined to defend, as explained below:

The U.S. Department of State filed proof of service with the Chinese government on Nov. 12. But the Embassy of the People’s Republic of China in the United States filed a letter with the court on Nov. 29 claiming it did not have to respond to the lawsuit. "The purpose that the Chinese Government applies and installs the Green Dam Youth Escort software is to use web filter technology to block pornographic texts and images on the internet and to protect minors from internet pornography and other dangers," the embassy wrote. "For the US company to sue China as a State, it is nothing but an uncalled for and unwarranted lawsuit."



Here’s an invitation for readers to guest blog or comment on a question related to mass tort litigation, governments and substances that are extracted and exported despite known health risks and the absence of complete certainty regarding health effects. Feel free to reframe the question, but I see it as:  

when, if ever, should  government agencies and/or officials be held liable for statements or other actions taken in support of commercial mining, extracting, distributing or manufacturing of substances known to have some health risks. For example, mining , exporting and manufacturing involving chrysotile asbestos fibers. 

Obviously various sovereign immnunity doctrines already exist and tend to draw lines between tradtional government activties, discretionary functions, and commercial activities. Those lines and these issues seem to me likely to face renewed scrutiny over the next few years due to increased globalization and explicit government outreach to and involvement in commercial activities with international impacts.  For some context for the question, consider this prior post regarding “aiding and abetting” claims asserted against two goverments for assisting the Stanford ponzi scheme.  Consider also a recent article regarding Canadian physicians accusing Canadian officials of issuing misleading statements about the absence or presence of health hazards from chrsyotile asbestos fibers.  The text pasted below is  from this February 12, 2010 article by Michelle Lalonde from the Canadian Gazette. 

Continue Reading Sovereigns and Their Roles Related to Commercial Activities Involving Substances that Present Health Risks

Now it’s west (from Chicago) to Australia, asbestos and the public company fiber cement business commonly known as James Hardie.

 The short story is that James Hardie and its officers and directors have been through a wringer as several were convicted of securities violations in connection with information disseminated regarding ”asbestos liabilities” and a foundation set up by various former Hardie entities to manage and pay asbestos claims.   The convictions are on appeal. For more specifics on the past, look to the left for prior posts indexed under the topic ”James Hardie.” 

Rapid Global Movement Makes Local Policy Hard to Enforce:   Hardies actions are noteworthy for multiple reasons other than the securities convictions. For one, note that Hardie’s recent global corporate “citizenship”  translocations from Australia to The Netherlands and now Ireland, all in just 9 years. The point? Money and ownership will move to wherever financial engineering offers a material opportunity to avoid taxes, achieve tax benefits, or avoid or limit liabilities. This point needs to be understood by policy makers, tort claimants, tort case co-defendants and insurers because of its implications for tort claiming and risk spreading.  Simply put, parochial local  approaches to tort law may be politically attractive at times (e.g. take action to save local jobs) but one should expect the tort system will be gamed just as some financiers play games with states in the US for financial incentives to relocate –  for a few years -  the corporate headquarters or a manufacturing facility. The wills of state legislatures, the long term abstractions of tort law professors, and the opinions of slow moving appellate courts are all much less relevant when, as now, ownership, the corporate ”home” and money, can all be moved in a matter of  months.  (One wonders when an enterprising tropical island will enact legislation favorable to companies facing long tail tort claims. One might look to the precedent set in the  UK with FSA legislation that helped the “the names” and the Lloyds insurance market run away from their insurance obligations. Or, one might also consider states that set up rules considered unduly favorable to one side or another - some might say that West Virginia, Texas, New York, South Dakota, and Delaware all provide classic examples of this approach  … )

Private Tort Claim Foundation as an Alternative to Chapter 11 ?  By any reasonable standard, current and former Hardie entities  Hardie entities face claims for  at least a billion or two of claims, and maybe much more, depending on how one defines claims (do overseas claims count; what about property damages claims). In the US, the now-defined answer would be to file one or two subsidiaries file a Chapter 11 case in Delaware or New York. Then, via the parent company chipping in some money and/or rights related to some “shared insurance,” the parent and all subsidiaries likely would end up with an injunction  purporting to protect them against a future claim anywhere in the world. Thanks to the rampant lack of due process and the resulting lack of objectors in chapter 11 cases (highlighted most recently by GM and Chrysler), most such plans succeed, at least in the sense that confirmation is obtained.

Hardie, however, did not pursue that path and instead set up a private foundation to manage and pay claims, backed by some conditional promises of future cash flow from Hardie entities. The foundation has now been in place for almost a decade. Future posts will explore some specific aspects of the Hardie foundation. For now, for 213 pages of Hardie facts and history as narrated by KPMG as advisors, go here and read/skim through a 2006 liability estimate.

While reading, note, among other things, that Hardie entities have been selling asbestos products since the early 1900s, owned a chryotile asbestos mine in Australia, sold products internationally, participated in various international joint ventures, and sold a wide range of asbestos-containing products. Sales included a asbestos-cement building materials, pipe insulation, and friction products, as well as sales of raw chrysotile asbestos fiber. Note also that some of Hardie’s cement and insulation products included one or both of  two types of the highly lethal amphibole fibers, which are crocidolite (apparently mined in Australia at Wittenoom) and amosite from Cape or others in South Africa (amosite being a sort of a contraction for “asbestos from the mines of  South Africa”).

Here is an unexpected but interesting non-asbestos example of conflict of interest issues arising from efforts to resolve “mass torts” for various persons around the world. The example arises from the airplane crash and airplane hijacking blamed on Libyan terrorists. The article describes a recently filed lawsuit in which two victims of the crash object to the terms of the settlement with Libya. In brief, the two plaintiffs argue that the lawyers who represented the crash victims, Crowell & Moring, operated under conflicts of interest and that the agreement improperly commingles the interests of the various different categories of claimants, including US and non US claimants. The article includes a link to the complaint itself. The complaint, however, does not attach a copy of a “joint prosecution” agreement apparently signed by the plaintiffs and many others.

Here are excerpts from the article by Roger Alford:

“The facts as alleged in the complaint of Davé v. Crowell & Moring are complex. In brief, Libya has been implicated in terrorist activities on numerous occasions, most notably the hijacking of Pan Am Flight 73 in Karachi, Pakistan on September 5, 1986 and the bombing of Pan Am Flight 103 over Lockerbie, Scotland on December 21, 1988. In 2005, victims of these terrorist attacks and their heirs–including American and non-American victims–retained the law firm of Crowell & Moring–known for representing victims of terrorism–to pursue litigation against Libya. The Davés were among those who signed the Crowell & Moring retainer agreement. As part of retaining Crowell & Moring, every client was also required to sign a joint prosecution agreement (“JPA“), a provision of which provided that the proceeds recovered by any signatory to the JPA shall be shared on a sliding scale based on type of injury with all signatories to the JPA, without distinction as to nationality. Only 23% of the victims who signed the JPA were American. A Liaison Group consisting of one American and four non-Americans was established as agents for the victims in their dealings with litigation counsel. The Liaison Group was represented by Latham & Watkins. In 2008, the United States government entered into a bilateral treaty with Libya for an award of compensation for all U.S. nationals harmed by Libyan terrorism, including the victims of the Pam Am Flight 73 hijacking, which included plaintiffs Gargi and Giatri Davé. The treaty provided for distribution of these funds through the Treasury Department’s Foreign Claims Settlement Commission (“FCSC“). After the Davés successfully received notice of their entitlement to millions under the FCSC process, Crowell & Moring issued a demand letter to the Davés contending that under the retainer agreement and the JPA the funds secured by the United States government pursuant to the U.S.-Libya treaty on behalf of American victims are to be shared among all of the victims of Libyan terrorism, American and non-American alike. In other words, the vast majority of the funds secured by American nationals under the U.S.-Libya treaty are–approximately 90% according to Crowell & Moring–required to be paid to non-Americans pursuant to these private agreements.”