Uranium Antitrust Litigation

CRA Limited (now known as Rio Tinto) Corporate				resorted post-Westinghouse to diplomatic initiatives
Counsel, Rohan George Skea, was one of the key				to address some of the disputed jurisdictional dispute
lawyers on CRA’s Australian legal defense				issues.
team, comprising Sir Roderick Carnegie, Executive				Australia commenced a process of negotiation with
Chairman of CRA, other CRA in-house counsel,				the US and after several years concluded the
Australian lawyers, Arthur Robinson & Co, and				Agreement between the Government of Australia
CRA’s US Counsel, Robert Osgood of Sullivan				and the Government of the United States of
& Cromwell in New York, involved in the				America Relating to Cooperation on Antitrust Matters.
application of the Australian Government’s				The Antitrust Cooperation Agreement instituted a
international antitrust “blocking” and				notification procedure between Australia and the
“claw-back” legislation. The blocking and				United States with the intention being to avoid
claw-back statutes were enacted by Prime Minister				conflicts between the two countries and their
Malcolm Fraser’s Australian Government in				“..laws, policies and national interests and for
response to the USD7.5 billion antitrust treble				the purpose to give due regard to each
damages claim launched in 1976 by Westinghouse				other’s sovereignty and to considerations of
Electric Corporation (“Westinghouse”)				comity”.
against 29 foreign and US domestic uranium				Under the Antitrust Cooperation Agreement each
producers. Westinghouse alleged those producers				country has notification rights. Australia may notify
were co-conspirators in an international cartel				the US of Australian governmental policies that may
controlling the supply and price of uranium.				have antitrust implications in the US. The US is to
The CRA defense team, including Rohan George				notify Australia if the Department of Justice or the
Skea, worked together with the Australian				Federal Trade Commission “...Undertake[s] an
Government, the Australian				antitrust investigation that may have implications for
Attorney-General’s Department and other				Australian laws, policies or national interests” .
agencies in relation to the application and				In addition, following notification, either country may
implementation of policy and legislative responses of				request consultation if the other country’s
the Australian Government in relation to the attempts				antitrust policies adversely affect the requesting
by US Courts, with the support of the United States				country.
Government, to extraterritorially apply United States				However, notification and consultation does not
antitrust laws to the alleged activities of CRA, Rio				necessarily mean or guarantee a resolution of any
Tinto (UK) and other Australian and foreign				future conflict. To date, the record of
corporations.				intergovernmental agreement on extraterritorial
The Westinghouse Uranium Antitrust case was for				antitrust issues is not encouraging. Further, the
nearly 10 years the most significant foreign relations				problem of private extraterritorial enforcement of US
problem between the United States Government and				antitrust laws,being the very problem at the core of
the Governments of the United Kingdom, Australia,				the Westinghouse case, remains without a firm
Canada and South Africa.				resolution, even with the advent of the Antitrust
Westinghouse alleged that the Uranium				Cooperation Agreement.
Producers’ Cartel comprised the major				The Antitrust Cooperation Agreement has a number
suppliers of uranium. The companies allegedly involved				of important limitations. Article 6 of that Agreement
represented some of the world’s largest				provides that the Australian Government may
resource companies, together with the				request the US Government to participate in private
world’s major uranium suppliers. The alleged				antitrust proceedings where the proceedings relate to
members, being defendants in the case, were, Rio				conduct, or conduct pursuant to a policy of the
Algom Limited, Rio Algom Corporation, Rio Tinto Zinc				Government of Australia, that has been the subject
Corporation Limited, RTZ Services Limited, Rio Tinto				of notification and consultation between the
Zinc Corporation, Conzinc Rio Tinto of Australia				Governments under the Agreement. In those cases,
Limited (“CRA”), Mary Kathleen Uranium				the US Government is required to report to the
Limited, Pancontinental Mining Limited, Queensland				court on the substance and outcome of the
Mines Limited, Nuclear Fuels Corporation,				inter-governmental consultations.
Anglo-American Corporation of South Africa Limited,				While this approach is an improvement on the
Engelhard Minerals and Chemicals Corporation, Denison				situation that applied during the Westinghouse
Mines Limited, Denison Mines (U.S.) Incorporated,				proceedings, it is by no means a resolution of the
Noranda Mines Limited, Gulf Oil Corporation, Gulf				jurisdictional issues which plagued that case and
Minerals Canada Limited, Kerr-McGee Corporation, the				caused the strained relations between Australia, other
Anaconda Company, Getty Oil Company, Utah				foreign governments, and the United States. The
International Inc., Phelps Dodge Corporation, Western				Antitrust Cooperation Agreement is quite limited in
Nuclear, Inc., Homestake Mining Company, Federal				the case of private prosecution of US antitrust laws.
Resources Corporation, Pioneer Nuclear, Inc., Atlas				The Agreement simply excludes private prosecutions
Corporation, Reserve Oil and Minerals Corporation,				which have not involved conduct that has been the
United Nuclear Corporation, and Atlas Alloys, Inc.				subject of inter-governmental consultations. In simple
Because of the strategic and defense interests of				terms, this means the Agreement will not apply to a
the nations involved in the uranium supply industry ,				repetition of the very circumstances which gave rise
the commercial dispute between Westinghouse and				to the Westinghouse case. The Uranium
the alleged members of the Uranium				Producers’ Cartel was formed in secret with
Producers’ Cartel inevitably and quickly				the support and encouragement of respective
became elevated into a serious clash between the				foreign governments, and with deliberate
governments of the companies involved .The case				non-disclosure to the US Government, in order to
also escalated into a bitter and hard fought legal fight				achieve certain commercial and strategic advantages.
between the United States and the claimed				Whether the strategy was ever directed specifically
extraterritorial application of its domestic antitrust				at Westinghouse or against US commercial interests
laws, and the sovereign rights of each of the other				has been the subject of much speculation .That it
governments involved to make and enforce laws				had that effect is undeniable. It is unlikely that such a
within their respective territorial jurisdictions.				conspiracy, if ever repeated, would be disclosed
The international legal controversy at the core of the				under the Antitrust Cooperation Agreement as any
jurisdictional dispute was not new, as the clash				such disclosure would be antithetical to the nature
between the claimed extraterritorial application of US				and object of such a conspiracy. Accordingly, the
antitrust laws and the international legal principles of				effect of the Westinghouse case and the Antitrust
comity has had a long jurisprudential history. The				Cooperation Agreement is that there is little incentive
Westinghouse fight, while conducted within the polite				for the Australian or any other foreign government
“language” of international diplomacy,				to engage in or encourage similar cartel behavior in
represented a serious rupture in the otherwise				the future. To that extent, the Westinghouse case
long-standing cooperation on international legal issues				and the Antitrust Cooperation Agreement has, for
among allies and friendly governments, and caused				practical purposes, put a stop to any such blatant
inquiry and policy soul searching on all sides of the				cartel behavior or, at the very least, ought to cause
debate long after the Westinghouse case was				any party contemplating such behavior to give
settled in 1982. The settlement decision was				serious consideration to alternatives given the
facilitated by the election of Ronald Reagan as				consequences which will likely follow .In addition, the
President in late 1980. President Reagan needed the				Agreement effectively only applies to conduct that
producers on board to gain privileged access into the				has been encouraged or mandated by Australian
Japanese market. It has been asserted that access				Government policy. This means the Agreement
to the Japanese market was also a long-standing goal				excludes parties whose conduct does not fall within
of the Australian Government.				that imprecise ambit. The precise boundary of that
Following the Westinghouse settlement, CRA				ambit may not always be clear as was demonstrated
developed close links with the Reagan Administration				in the Westinghouse case .
in relation to its proposed major foreign investment				Australia continued to develop its legislative response
initiatives in respect to special steel production in the				to the Westinghouse case and the threat of future
United States. These initiatives were quickly launched				private extraterritorial enforcement of US antitrust
by CRA following the settlement with Westinghouse.				laws by repealing the FPA and FAJA and enacting the
Mr Skea was a one of the key executives in				Foreign Proceedings (Excess of Jurisdiction) Act 1984
CRA’s US business development team and				(Cth) (“FPEJA”). The stated purpose of
was deeply involved in the confidential discussions in				the FPEJA was to “. Consolidate and expand
Washington and California with the Reagan				Australian laws which protect Australian trading
Administration’s White House executive team.				interests and policies against extraterritorial
Those discussions involved the negotiation of Federal				enforcement of foreign laws”. The introduction
and California State tax relief and the government				of this law was not without Parliamentary
support package to support CRA’s proposed				controversy and concern at Ministerial level that the
massive investment in leading edge US steel				enactment may provoke an adverse response from
technologies and manufacture at the mothballed				the US Government. However, the Government
Kaiser Steel plant at Fontana in California.				remained seriously concerned at the threat to its
In addition, CRA’s negotiating team, led by Ira				exercise of sovereignty and to its trade policies of
Davidson (former executive vice-president of Kaiser				private extraterritorial antitrust prosecutions. In simple
Aluminum and Chemical Corporation) and Rohan Skea,				terms, the Australian Government recognized that
developed extensive US political connections and				international consultations with the US Government
support to secure CRA’s entry into main				would not stop a determined US plaintiff seeking
stream steel manufacture in the United States by				extraterritorial application of US antitrust laws within
regular contact and meetings in Washington with key				Australia and, more importantly, the economic chaos
Senators and Congressman on Senate and				which could occur through the enforcement of
Congressional Committees dealing with foreign				injunctions or asset seizures pursuant to such actions.
investment, taxation, industry and labor relations, and				Given that the large majority of US antitrust cases
with the California Governor’s office (under				have been initiated by private parties, the threat was
Governor Jerry Brown and later under Governor				real and was not resolvable by reliance on the limited
George Deukmejian) and State legislature				provisions of the Antitrust Cooperation Agreement
representatives.				.Under the FPEJA the Australian Government
Davidson and Skea, received powerful support in				responded to the threat of private extraterritorial
building US political and business links from				prosecution of US antitrust laws by adopting a five
CRA’s US lawyers, O’Melveny &				pronged approach comprising:
Myers, who were engaged in relation to				Prohibition of Giving Evidence
CRA’s US steel technology and manufacturing				The FPEJA adopted the same provisions dealing with
investment. Rohan Skea worked closely with the				the prohibition of giving evidence to foreign courts as
O’Melveny & Myers legal team led by				were contained in the FPA.
Chairman, Warren Christopher and senior partner,				Blocking Foreign Antitrust Judgments
Charles Bakaly Jr. In particular, Warren				The FPEJA also adopted similar provisions to those in
Christopher’s Washington connections were				the FAJA relating to blocking foreign antitrust
impeccable. Christopher had been the Deputy				judgments.
Secretary of State under President Jimmy Carter and				Non-Compliance with Foreign Orders
was widely acknowledged as the person responsible				The FEPJA empowered the Attorney-General to
for successfully negotiating the release of 52 U.S.				prohibit a person from complying with
diplomats who were held hostage in Iran for 444				(non-monetary) foreign judgments requiring an act to
days from November 4, 1979 to January 20, 1981,				be performed in Australia if this act would be
after a group of Islamist student radicals loyal to				contrary to the national interest. The Australian
Ayatollah Ruhollah Khomeini took over the American				Government’s intention was that the
embassy in Tehran. It has been suggested by some				provisions could be used to combat divestiture and
former hostages that one of those student radicals				“cease and desist” orders made under
was Mahmud Ahmadinejad, now the President of the				US antitrust laws.
Islamic Republic of Iran, and who is currently locked in				Claw-back
a serious international controversy with President				The new and controversial development was the
George W Bush and				enactment of antitrust specific defensive measures
International Atomic Energy Agency director				which incorporated claw-back rights. These provisions,
Mohamed ElBaradei over Iran’s uranium				which were modeled on equivalent provisions
enrichment program and the threat of an Iranian				contained in UK legislation introduced by Prime
nuclear weapon . President Ahmadinejad has denied				Minister, Margaret Thatcher, conferred a right of
his involvement in the taking of the hostages. The				action on an Australian defendant in foreign antitrust
student radicals, named Muslim Student Followers of				proceedings where the Attorney-General has made
the Imam's Line, demanded the return and trial of				an order that a judgment against the defendant
Mohammad Reza Pahlavi, the Shah of Iran, who had				should not be enforceable in Australia (in whole or in
been permitted to enter the US for medical				part).The FPEJA took the UK approach to blocking
treatment following intervention on the Shah’s				legislation and expanded the scope of the provisions.
behalf by influential figures including former United				Under the FPEJA an Australian defendant can institute
States Secretary of State Henry Kissinger and				an action in Australia for recovery from a foreign
Council on Foreign Relations chairman David				plaintiff of an amount equal to the judgment sum
Rockefeller, The hostages’ ordeal transfixed				granted in the foreign antitrust proceedings, together
the world and reached a climax when after initial				with a limited right to recover reasonable costs and
failed attempts to negotiate a release, President				expenses incurred by it in defending private antitrust
Carter ordered the United States military to attempt				proceedings.
a rescue operation, Operation Eagle Claw, on April 24,				Reciprocal Enforcement Arrangements
1980, which resulted in an aborted mission, the crash				The FPEJA empowers the Australian Government to
of two aircraft and the deaths of eight American				enter into reciprocal enforcement arrangements with
military men. Following Christopher’s lengthy				other countries that have similar claw-back provisions.
and skilled negotiations the crisis ended with the				This was included because the UK had made
signing of the Algiers Accords in Algeria on January				provision for such a system in its blocking legislation
19, 1981. The hostages were formally released into				and had expressed an interest in reciprocity to
United States custody the following day, just minutes				address the position of multinational defendants, such
after the new American president Ronald Reagan				as CRA and Rio Tinto, who had substantial assets at
was sworn in. Christopher also spearheaded the				risk in both the UK and Australia. Australia and the UK
Sino-American relations with the People's Republic of				signed an agreement relating to the reciprocal
China, helped to win ratification of the Panama Canal				recognition and enforcement of judgments in 1994.
treaties, and headed the first interagency group on				Blocking Foreign Commercial Orders and Decisions
human rights. President Jimmy Carter awarded him				The antitrust focus of the FPEJA was expanded so
the Presidential Medal of Freedom, the nation's				as to empower the Attorney-General, where
highest civilian award, on January 16, 1981. In addition,				considered desirable for the protection of the national
Christopher went on to be appointed by President Bill				interest, to make orders blocking actions or decisions
Clinton as the 63rd Secretary of State on January				of foreign governments under laws relating to trade
20, 1993, and served until 1997. Christopher				or commerce that impose an obligation upon an
negotiated an end to the bloody war in Bosnia and				Australian person or company that has to be
Herzegovina and Serbia, through the Dayton Peace				performed in Australia.
Agreement. He also negotiated a peaceful resolution				To ensure compliance with the FPEJA the Australian
to the military takeover in Haiti, and restored the				Government imposed a range of sanctions. The Act
democratically elected president Jean-Bertrand				provides that contravention of an order made under
Aristide.				the FPEJA is an offence punishable by a fine not
In the space of several years, CRA, assisted by the				exceeding AU$50 000 or imprisonment for a period
efforts of its US business development team, led by				of up to 12 months for a natural person and a fine
Davidson and Skea, and Warren Christopher’s				not exceeding AU$250 000 for a corporation.
team from O’Melveny & Myers, turned				Since the Westinghouse case the focus of the
CRA’s reputation around from an alleged				extraterritorial application of US antitrust and trade
antitrust violator, as claimed by Westinghouse, and				laws has diffused and shifted to include the various
being unable to transact business in the United States				responses by the EU and Canada to the
because of proceedings in the Westinghouse case, to				Helms-Burton Act and the D’Amato Act in
a significant and welcome foreign investor with				relation to trade with Cuba, Iran and Libya. The
powerful links in the political elite in the US ranging				threat of Westinghouse type private US antitrust
from the Reagan White House Administration, to				actions affecting Australian corporations and interests
both sides of politics in the US Senate and Congress,				has receded and there have been no protective or
through to the California Governor’s mansion.				blocking orders made by the Attorney-General under
As a direct result of these high level and confidential				the FPEJA.
activities, CRA negotiated access to generous				However, the introduction of the Helms-Burton Act
Federal and State tax and other incentives supporting				and D’Amato Act raised again the issue of
its proposed US investments. At the height of the				extraterritorial application of US laws and the clash
Westinghouse battle, when CRA executives could				with Australia’s national interest. In brief, both
not travel to the US for fear of arrest and				Acts employ a variety of methods, including
imprisonment, such a privileged and influential position				secondary boycott sanctions, to affect US foreign
in the US was barely imaginable.				policy with respect to Cuba, Iran and Libya. These US
While the Westinghouse case was settled, the issues				extraterritorial trade controls have the potential to
revolving around international comity and the				cause new clashes with Australia. The provisions in
extraterritorial application of United States antitrust				these laws represent a new and different approach
and trade laws, and the enforcement of antitrust				by the US to use secondary boycott sanctions,
judgments in foreign countries, are far from settled				private treble damages suits and exclusion from the
and the potential for serious controversy remains				US as a means for pursuing US foreign policy
between the United States and the governments of				objectives.
foreign countries over these issues. In the period				Australia, unlike Canada and the EU, has not
since 1982, the United States Government, and				responded to these potential threats with any
governments of various other countries, have been				modification of the FPEJA. Canada introduced
steadily introducing legislation which has the potential				amendments to its antitrust blocking legislation to
to underscore a major fall out between Western				respond to the new ways in which US extraterritorial
governments over the extraterritorial application of				legislation was being used, and similar action was
United States antitrust and trade laws.				taken by the EU.
The Westinghouse case procedures triggered the				The Australian Government’s decision not to
first legislative responses in Australia to the				respond legislatively to the Helms-Burton Act and the
extraterritorial application of United States antitrust				D’Amato Act appears to reflect a cautious
laws in the form of blocking legislation. The				approach in managing its judicial relationship with the
Westinghouse Uranium Antitrust case was itself a				United States and acknowledges the limited
response by Westinghouse to various suits launched				interaction of Australian interests with Cuba, Libya
against it by US energy utilities for breach by				and Iran. This was notwithstanding that the US
Westinghouse of uranium supply contracts entered				foreign policy underpinning the Helms-Burton Act was
into by Westinghouse as part of its sales of US				in direct conflict with the Australian
nuclear power plants. Westinghouse’s defense				Government’s foreign policy with respect to
to those suits was the commercial impossibility or				Cuba; a policy which allows Australians to trade with
impracticability of its obligations under the uranium				Cuba and encourages a multilateral international
supply agreements due to the alleged price and				approach to Cuban reform. Australia has also stated
supply fixing arrangements among the members of				that it has “urged the US to step away from
the Uranium Producers’ Cartel . Westinghouse				extra-territorial measures and to adopt a cooperative
alleged the conspiratorial activities of the members of				approach to shared foreign policy interests rather
the Uranium Producers’ Cartel had restricted				than going it alone”. The Australian
the supply of world uranium, and had so increased				Government, while sharing US concerns over the
the price of that uranium, that Westinghouse was				pace and depth of economic and political reform in
unable to supply the uranium without suffering a				Cuba, nonetheless was of the view that engagement
massive loss. The cost to American consumers if				rather than isolation was more likely to be successful
those increases were passed on was estimated in				in bringing about positive change in Cuba.
the billions of dollars. The Uranium Antitrust Case				The D’Amato Act was designed to further US
centered on the alleged actions of the members of				foreign policy with respect to Iran and Libya by
the cartel in limiting and allocating the production and				imposing sanctions on persons who invest in the
sale of uranium outside the US.				Iranian or Libyan oil or gas industries, or sell specified
The Westinghouse case proceeded under the				goods, services or technology to Libya. The US
Sherman Act which applies to anti-competitive				classified Iran and Libya as sponsors of terrorism and
activities in trade or commerce within the United				acquirers of weapons of mass destruction (WMD),
States and with foreign nations. Unlike other countries				and considered that the two nations ‘endanger
competition laws, the extraterritorial application of US				the national security and foreign policy interests of
antitrust laws is potentially very wide. The US				the United States’ and its allies .
approach is that where there are direct, substantial				The US position recognized that the economies of
and foreseeable “effects” upon the US				Iran and Libya are primarily supported by income
market, and that it is “reasonable” to				from their oil and gas industries. Consequently,
exercise jurisdiction, the party concerned is subject				blocking foreign investment in the oil and gas sectors
to US antitrust laws. For that purpose, it does not				was likely to have a major impact on the
matter where that party is incorporated or where				countries’ economies and, in turn, upon their
the offending conduct took place.				governments’ revenue and ability to fund
An important feature of US antitrust laws is that				terrorist activities.
enforcement can be initiated by Government				The specific policy objectives of the United States
agencies and by private parties .Public enforcement				Government in relation to Iran were to deny Iran the
can be by criminal or civil proceedings by either the				ability to support acts of international terrorism and
US Attorney-General , or the Federal Trade				to fund the development, acquisition and supply of
Commission . However, in private proceedings the				WMD. The Libyan sanctions were designed to press
plaintiff is entitled to seek treble damages for the				Libya to comply with its obligations under several
damages or losses incurred as a consequence of the				United Nations Security Council Resolutions to end all
alleged antitrust behavior of defendants. In addition,				support for acts of international terrorism and to
plaintiffs are entitled to injunctive relief for any				impede efforts to develop or acquire WMD .The US
threatened damage likely to be caused by a				has maintained economic sanctions, in various forms,
defendant’s anti-competitive conduct. The				against Iran and Libya for several decades as a
combination of the threat of treble damages, and				means of exerting pressure to cease their
extensive injunctive relief available to US plaintiffs				involvement in terrorist activities. The US has also
under US laws has proven a powerful weapon				used primary boycott sanctions prohibiting domestic
against domestic and foreign anti-competitive				trade and investment with Iran and Libya as a means
conduct.				of pursuing its foreign policy objectives.
In the face of massive losses in its breach of				In addition, the UN has also introduced economic
contract disputes with the US nuclear energy utilities,				sanctions against Libya in an effort to curb terrorist
Westinghouse commenced a treble damages suit				activities. The D’Amato Act was the first
against the members of the Uranium				secondary boycott measure adopted by the US
Producers’ Cartel and applied for various				against Iran and Libya.
forms of injunctive relief. In addition, the US Justice				From Australia’s perspective, the
Department initiated an official investigation into the				D’Amato Act was more of an issue than the
activities of the alleged cartel, and empanelled a				Helms-Burton Act in terms of its adverse impact
Grand Jury to determine whether criminal sanctions				upon Australia, as Australia has more investment in
applied. Both Westinghouse and the Justice				Iran than Cuba.
Department made document discovery and witness				Unfortunately, the FPEJA was primarily designed to
deposition requests against all the defendants in the				combat the effects of the enforcement of US
cartel. These interlocutory requests, if enforced, had				extraterritorial antitrust legislation, and does not
the potential to apply to millions of documents in the				adequately respond to the Helms-Burton Act or
possession of the defendant corporations and would				D’Amato Act sanctions .On the other hand,
have involved corporations and individual witnesses				the EU and Canada perceived the threat and adopted
becoming subject to in personam jurisdiction in the				blocking legislation specifically targeting the effects of
US. As part of the process of enforcing its right to				these new US extraterritorial trade sanctions.
discovery of documents and taking of evidence,				The EU supported the US policy objectives involved
Westinghouse issued letters rogatory to the				in the Helms-Burton Act and D’Amato Act but
Supreme Court of New South Wales seeking the				strongly criticized the method adopted by the US.
Court to enforce its discovery and deposition				The EU responded to the US unilateral economic
requests. Similar letters rogatory were addressed to				sanctions against Cuba, Iran and Libya by introducing
the Supreme Court of Ontario and the High Court of				comprehensive legislative blocking measures and
Justice in England.				initiating World Trade Organization
A number of defendants, including the Australian				(“WTO”) proceedings challenging the
defendants, refused to appear in the US courts to				legality of the Helms-Burton Act.
defend the proceedings. The defaulting defendants				The EU blocking legislation, Protecting Against the
comprised four Australian companies: Conzinc Rio				Effects of the Extra-Territorial Application of
Tinto of Australia Ltd (“CRA”), Mary				Legislation Adopted by a Third Country (‘EU
Kathleen Uranium Ltd, Pancontinental Mining Ltd and				Regulation’) , was directed at the
Queensland Mines Ltd; two British companies: Rio				Helms-Burton Act, the Cuban Democracy Act, the
Tinto Corp. Ltd. (“RTZ”) and RTZ				Cuban Assets Control Regulations and the
Services Ltd.; two South African companies: Nuclear				D’Amato Act. The EU Regulation was
Fuels Corporation of South Africa and Anglo				modeled on, but is more comprehensive than, the UK
American Corporation of South Africa Ltd.; and one				PTIA. It includes prohibitions on the recognition and
Canadian corporation, Rio Algom Ltd. In effect, the				enforcement of foreign judgments or administrative
RTZ Group, comprising RTZ, RTZ Services, CRA,				decisions giving direct or indirect effect to the
Mary Kathleen and Rio Algom, refused to appear in				sanctions covered by the EU Regulation; claw-back
US Courts and acknowledge the extraterritorial				provisions; recovery of any damages, including legal
jurisdiction of US antitrust laws.				costs, caused by the application of the sanctions; and
In addition, the defaulting Australian defendants				forbids compliance by EU persons with the
banned their executives from traveling to the US,				requirements of the listed instruments, whether it be
refused the document discovery requests, and				direct or indirect (through a subsidiary) or by active
refused to submit themselves or their executives to				or deliberate omission. On the other hand, the EU
in personam jurisdiction. Accordingly, the battle lines				Regulation pragmatically provides that where
were drawn between Westinghouse and the				non-compliance would seriously damage the interests
defendants who had defaulted in appearance and the				of the affected person or those of the EU, the
issues were quickly elevated to an international judicial				person may be authorised to comply fully or partially
and policy stand-off between the United States,				with the US sanctions. The EU Regulation also
Australia, the United Kingdom, Canada and South				prevents compliance with foreign orders requesting
Africa.				documents or evidence. Finally, the EU Regulation
The international stand-off produced both civil and				requires EU persons, including directors, managers and
governmental responses. Westinghouse swiftly				other persons with management responsibilities, to
retaliated against the defaulters and successfully				report within 30 days to the EU Commission
obtained interlocutory orders in the US against the				instances in which their economic and/or financial
defaulting defendants which severely constrained the				interests are directly or indirectly affected by the
ability of those companies to conduct business in the				sanctions covered by the EU Regulation.
US and with US companies. These orders placed the				Canada introduced blocking legislation specifically
flow of funds into and out of the US based entities,				aimed at reducing the impact of US extraterritorial
and the disposal of assets, under the control of US				trade laws. Canada passed sanction specific
courts. Some of the defaulting defendants continued				amendments to the Foreign Extraterritorial Measures
to flagrantly ignore those orders and attempted to				Act (‘FEMA’) . FEMA was introduced in
transfer funds out of the US resulting in further				response to the Westinghouse case and was
orders being successfully sought by Westinghouse.				modeled upon the UK PTIA blocking legislation. While
These orders were very stringent. For example,				FEMA incorporated powers to deal with US boycott
Westinghouse successfully enjoined RTZ subsidiary,				legislation, even though it was originally designed to
Rio Algom Corporation, from making deposits in bank				block US antitrust litigation, the Canadian Government
accounts outside the United States; from making any				considered that FEMA should be amended in order to
transfers out of the United States without twenty				respond to the US secondary boycott legislation and
days' prior notice to the Court; requiring Rio Algom to				acted swiftly in introducing the amendments.
deposit the revenues of its Utah mining operation in				The powers of the Canadian Attorney-General under
United States banks; and enjoining the officers,				FEMA are triggered where he or she considers that
directors and employees of Rio Algom Limited from				the foreign judgment or measures significantly affect
making withdrawals from bank accounts of Rio				Canadian trading interests or infringe Canadian
Algom Corporation.				sovereignty. The Act includes various powers and
The foreign governmental responses were equally				provisions including: the power to prohibit Canadian
swift, and were devastating to				records and/or information being produced or
Westinghouse’s ability to conduct its case and,				disclosed to a foreign tribunal, including prohibition on
ultimately, prevented the enforcement of the				the giving of evidence by a Canadian citizen or
interlocutory proceedings in several key countries and				resident in foreign proceedings; the power to issue
threatened to prevent enforcement of any final				orders forbidding the enforcement of foreign
judgment in those countries.				antitrust judgments in Canada and foreign trade laws
Australia reacted quickly to the initial Westinghouse				that the Attorney-General considers, with the
proceedings, and the issue of letters rogatory				concurrence of the Canadian Minister of Foreign
seeking document discovery and evidence from the				Affairs, violate international law and comity (the only
four Australian defendants, and enacted the Foreign				foreign trade law listed in the FEMA schedule to date
Proceedings (Prohibition of Certain Evidence) Act				is the Helms-Burton Act); claw-back powers which
1976 (Cth) (“FPA”). The FPA prohibited				also apply to judgments made under the
the production of documents or the giving of				Helms-Burton Act; a right for a Canadian defendant in
evidence in foreign proceedings where a foreign				foreign proceedings, brought under an instrument
court had failed to comply with international law or				listed in the FEMA schedule, to sue in a Canadian
comity, or where it was considered necessary to				court to recover the judgment sum, expenses and
protect national interests. The Orders made under				consequential loss or damage suffered by reason of
the FPA thwarted Westinghouse’s attempts				the enforcement of the foreign judgment; and the
to gain production ofdocuments in Australia or the				Act permits the Attorney-General, with the
giving of evidence by executives of the four				concurrence of the Minister of Foreign Affairs, to
Australian defendants . However, the passage of the				make orders blocking the application of foreign
FPA and the Orders were controversial and resulted				measures taken by a foreign state or foreign tribunal
in an unsuccessful High Court challenge. Although the				that adversely affect, or are likely to adversely
FPA was a significant step, it was not sufficient to				affect, Canadian interests or infringe upon
stop Westinghouse. Westinghouse obtained default				Canada’s sovereignty.
judgments and injunctions against the defaulting				The latter provisions authorize the Attorney-General
defendants. To block the enforcement of those				to make orders requiring Canadian citizens or
judgments and injunctions the Australian Government				residents to give notice to the Attorney-General of
quickly enacted the Foreign Antitrust Judgments				any directive, instruction, intimation of policy or other
(Restriction of Enforcement) Act 1979 (Cth)				communication relating to such measures from a
(“FAJA”). The FAJA empowered the				person who is in a position to direct or influence the
Australian Attorney-General to order certain foreign				policies of the person in Canada. The terms are
antitrust judgments to be unenforceable in Australia if				sufficiently broad to cover directives issued by a
the Attorney-General was satisfied that the foreign				foreign parent company to a Canadian subsidiary to
court had exercised jurisdiction in a manner				abide by the laws applicable in the country where the
inconsistent with international law or comity, or if the				foreign parent corporation operates .The Act also
judgment may be detrimental, or adversely affect,				empowers the Attorney-General to prohibit
Australian trade or commerce, or if it was in the				compliance by Canadian nationals with foreign
Australian national interest.				measures or directives, issued by persons in a
In addition, the FAJA enabled the Attorney-General				position to direct or influence the policies of the
to declare, in the case of judgments involving a				Canadian person, that are adverse to Canadian trade
specified sum of money that, for the purposes of				interests.
enforcement, the amount of a judgment could be				The Foreign Extraterritorial Measures (United States)
reduced to a specified amount. This meant that the				Order (1996) (“1996 FEMA Order”)
Attorney-General could allow an antitrust judgment				contains notification and non-compliance obligations
to be enforceable but exclude the treble damages				targeting the US Cuban legislative embargo measures.
element from enforcement.				With respect to the notification obligation, the 1996
The Australian Attorney-General subsequently made				FEMA Order requires Canadian corporations and their
an Order under the FAJA declaring that the judgment				directors and officers to “forthwith give
on the issues of liability given in favor of				notice” to the Attorney-General of any policies
Westinghouse against the nine defaulting defendants,				or communications they receive relating to an
together with the interlocutory injunctions in favor of				extraterritorial measure of the US. The term
Westinghouse, would not be recognized or				“extraterritorial measure” is broadly
enforceable in Australia.				defined so as to cover the Helms-Burton Act and
The Australian Government sought to justify its				any other instruments designed to enforce the US
“blocking” policy and legislation on				embargo against Cuba.
several grounds. As a matter of national interest, the				The Canadian Act also incorporates a range of
extraterritorial application of US antitrust laws directly				penalties for non-compliance including criminal
conflicted with Australia’s policy for the				sanctions. Section 7 authorizes the Canadian
development and marketing of Australian sourced				Government to prosecute violations of FEMA orders
uranium. It also conflicted with international marketing				either by indictment or by summary conviction. The
arrangements supported by the Australian and other				maximum fine for a corporation for indictable
non-US governments for the orderly marketing and				offences is CAN$1.5 million and for an individual
sale of uranium. However, the support of the				CAN$150,000. In relation to summary offences, the
Australian and other foreign governments did not				maximum fine for a corporation is CAN$150,000 and
amount to “sovereign compulsion”				CAN$15,000 for an individual and/or a maximum of
under US law which meant that the defense of				two years imprisonment. Prior to the 1997
“foreign sovereign compulsion” was				amendments, the penalties were considerably less.
unavailable to the foreign defendants. Further, even if				The penalties were increased to balance the US
that defense did apply it would not necessarily				penalties for contravention of certain extraterritorial
prevent the application of in persona jurisdiction. All of				measures. For instance, breaches of the US Cuban
the nine defaulting defendants were determined to				embargo regulations are punishable by fines of up to
avoid coming within US jurisdiction.				US$1 million.
The Australian Government was also seriously				The Australian Government has not followed the lead
concerned with the potentially devastating				of the EU or Canada. The bruising lessons learned in
consequences for the Australian economy if the				the “power politics” of the
USD7.5 billion damages claim was enforced against				Westinghouse litigation brought home in stark relief
the Australian defendants. This was a real and				the asymmetrical nature of the US/Australian political
legitimate issue. The Australian defendants were all				and economic relationship. Australia could ill afford
major resource companies and directly and indirectly				another serious rift in the political, economic and
had a profoundly significant place in the Australian				judicial dimensions of that relationship, particularly
economy. Further, the Australian Government was				where the genesis of the Westinghouse case rupture
also concerned that US courts had not given				was the ill-conceived and naïve involvement of
sufficient weight in the balancing of interests required				the Australian Government in supporting activities of
under international comity before the extraterritorial				companies involved in the alleged the Uranium
application of US antitrust laws was ordered.				Producers’ Cartel. While the case was settled,
The Australian and other foreign blocking and				and Australia/US relations were restored, the lessons
claw-back legislation forced Westinghouse and all the				were learned when Australia felt the full force of US
defendants to entertain a compromise and				reaction to foreign economic conspiracies aimed
commercial settlement. The settlement details were				squarely at US corporations and the US market .
not left to the commercial parties but involved the				The United States has made its position consistently
closest support, guidance and approval of the foreign				clear on this issue, particularly during the height of the
governments at the highest levels. The confidential				Westinghouse case. US Attorney-General, Griffin Bell
discussions among the parties to the case, and the				Jr. enunciated the US Justice Department’s
side discussions, consultations and ultimate approvals				two primary objectives of U.S. policy in the application
sought and obtained from the foreign governments				of US antitrust laws to foreign jurisdictions. First, to
were tortuous, lengthy and at times stretched				prevent national boundaries from providing a haven
relationships to breaking point. Neither side was a				from which Americans may flout laws designed to
willing participant in the settlement, but pragmatism				protect US domestic competition; and secondly, to
prevailed. Nonetheless, Westinghouse obtained a				prevent arrangements made abroad, such as foreign
workable outcome, but vastly short of its claim. On				cartels, from depriving U.S. consumers of the benefits
the other hand, the defendants, were required to				of competition among importers and between
pay Westinghouse a not insignificant sum, rumored to				domestic and foreign sources of supply. Although
be USD100 million, and some of the defendants				clear, this view is not universally embraced,
agreed to supply Westinghouse uranium on favorable				particularly where the U.S. is unique in its asserted
terms. Additionally, the defendants were relieved of				right to apply US criminal laws to activities beyond its
costly inhibitions to trading in the US and with US				territorial boundaries. Further, the US view has
corporations. As for the foreign governments, the				provoked protest from many countries including
sobering lesson was that international government				Britain, Australia and Canada.
“sponsored” collusion against the				However, while the private and public prosecution of
interests of US corporations and consumers, which				international cartels has been patchy , when the US is
did not extend to OPEC style governmental				involved, it is unlikely a future Australian government,
“Acts of State” and thereby gaining				or corporations, would ever involve themselves in
immunity from prosecution , was ultimately				similar such actions again.
unsuccessful and threatened their very relationships				To know more, please visit the site
with the US across all levels.				Note: John Connor, “Global Antitrust
Australia recognized the dangers of any future				Prosecutions of Modern International Cartels”,
conflict between the Australian national interest and				Dept. of Agricultural Economics, Purdue University,
the extraterritorial application of US antitrust laws and				Ind., Staff Paper #04-15, Nov.

Global Trade

Uranium Antitrust Litigation