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      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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A. Overview

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  1. One aspect of international practice in which we expect to see considerable activity in the next few years is private litigation involving sovereign entities - especially in the US, where the courts are relatively hospitable to such disputes (although not without limit).

  2. The wave of US litigation stemming from the crash of the Argentine economy in 2001 likely will serve as a model for the expected next wave of defaults on sovereign debt, moderate to draconian fiscal and monetary reforms, and nationalization schemes in the wake of the global financial crises.  The experience of the lower level US courts with Argentina has, to some extent, emboldened them to question the wisdom, utility, and fairness of broad applications of sovereign immunity in this context.  The signals from the US Supreme Court, however, continue to favor deference to traditional notions of comity and avoiding judicial interference in presumed non-US policy issues.

  3. We also see issues of sovereign immunity and deference to sovereign actions coming to a head outside the sovereign debt arena, including as US courts come to grips with "choreographed" litigation (especially in former Soviet jurisdictions), private initiation of criminal proceedings to gain leverage in business disputes, sovereign/private joint ventures, and nationalization/privatization of commercial enterprises.  (For example, in a decision handed down at the very end of 2008, a federal trial court in New Jersey noted that private US antitrust claims against 16 Chinese entities could embroil the court in difficult sovereign immunity and Act of State issues given the gradual transition of the Chinese economy from central planning to various levels of "privatization."  The court opted to avoid the issue altogether and dismissed for lack of subject matter jurisdiction under the Foreign Trade Antitrust Improvements Act.  Animal Science Products, Inc. v. China National Metals & Minerals Import & Export Corp., 2:05-cv-4376-GEB-ES (D. N.J. Dec. 30, 2008), Opinion, Dkt. No. 73.)

  4. We expect that the increasing exposure to these phenomena will cause US courts to examine and reexamine the scope, nature, and application of sovereign immunity and related immunities, including the "Act of State" doctrine.

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