GATA (Gold Anti-trust Action)Lawsuit... Page 8
IV. PLAINTIFF'S CLAIMS AGAINST THE BIS ARE NOT
WITHIN THE SCOPE OF ITS ARBITRATION PROVISION,
WHICH HAS LAPSED, TO WHICH HE NEVER AGREED, AND
WHICH FAILS TO MEET DUE PROCESS REQUIREMENTS.
Article 54(1) of the BIS's Statutes provides that disputes "with regard to the interpretation or application of the Statutes of the Bank" arising between the BIS its member banks or between it and its private shareholders "shall be referred for final decision to the Tribunal provided for by the Hague Agreement of January, 1930" (BIS.A. Ex. D).
This reference is not (as one might reasonably assume absent careful investigation) to the Permanent Court of Arbitration at the Hague. Rather, the reference is to an arbitration tribunal established under Article XV of the Agreement between Germany et al. Regarding the Complete and Final Settlement of the Question of Reparations, signed at The Hague on January 17, 1930 (104 L.N.T.S. 244) (P.A. Ex. B). The United States is not a signatory to this treaty, which adopted the "New Plan" (generally known as the "Young Plan") for payment of Germany's World War I reparations.
What is more, neither the United States nor the Federal Reserve has submitted itself to the jurisdiction of the Tribunal pursuant to the Brussels Protocol (197 L.N.T.S. 31) (P.A. 18-19). Nor, so far as is publicly known, have they yet done so by the purchase of BIS shares. Accordingly, the Tribunal cannot render a complete judgment on the plaintiff's claims that run not only against the BIS but also against Messrs. Greenspan and McDonough, who are wholly outside its jurisdiction.
A. The Treaty's Arbitration Tribunal Is Defunct.
The arbitration provision in the above-referenced treaty provided in relevant part (104 L.N.T.S. (P.A. Ex. B) 252-253):
1. Any dispute, whether between the Governments signatory to the present Agreement or between one or more of those Governments and the Bank for International Settlements, as to the interpretation or application of the New Plan shall ... be submitted for final decision to an arbitration tribunal of five members appointed for five years ....
9. The present provisions shall be duly accepted by the Bank for the settlement of any dispute which may arise between it and one or more of the signatory Governments as to the interpretation or application of its Statutes or the New Plan.
The New Plan expired long ago, and with it any justification for the continued existence of this arbitration tribunal, which under the treaty had a mandate to hear disputes only between the BIS and signatory governments, not between the BIS and its shareholders.
The arbitration provision in the original Constituent Charter governing the BIS's relationship with Switzerland similarly addresses only disputes with government. It provided (P.A. Ex. A, para. 11): "Any dispute between the Swiss Government and the Bank as to the interpretation or application of the present Charter shall be referred to the Arbitral Tribunal provided for by The Hague Agreement of January, 1930."
In 1987, the BIS and the Swiss Federal Council entered into a new agreement regarding the Bank's legal status in Switzerland (BIS.A. Ex. H). The first paragraph of article 27 of this agreement reenacts the arbitration clause of the old Constituent Charter. However, a new second paragraph provides a modern alternative to the lapsed arbitration tribunal under the Hague Agreement. Under the new paragraph, the parties can substitute an ad hoc panel of three members, with each party naming one member and the two designated members choosing a third as president.
Similarly, the BIS should have modernized Article 54(1) relating to arbitration of disputes with shareholders. It easily and quite appropriately could have designated the Permanent Court of Arbitration at the Hague as an alternative or substitute arbitration authority. The PCA regularly sets up arbitration tribunals to hear international disputes, and it has promulgated a modern set of rules for arbitration between international organizations and private parties.
Because the BIS failed to modernize Article 54(1), no arbitration tribunal was available to the plaintiff when he filed this case on December 7, 2000, in response to the freeze-out scheduled for implementation on January 8, 2001. Indeed, although requested to do, BIS officials failed to furnish him any information about the tribunal they now wish to invoke (P.A. 13). As they knew in December 2000 and for many years before, this tribunal had long ago ceased to exist notwithstanding that the treaty by its terms called for a permanently sitting body composed of members appointed for five-year terms, not an ad hoc panel chosen for specific disputes.
Nevertheless, although desuetude and World War II long ago rendered the tribunal defunct, BIS officials apparently set about trying to persuade the original signatory governments, at least two of which -- France and Belgium -- had a direct interest in the matter since parts of their own BIS issues were in private hands, to recreate the tribunal expressly for this case as well as others that were threatened over the freeze-out and have now materialized (P.A. 17). See, e.g., First Eagle Sogen Funds, Inc. v. Bank for International Settlements, No. 01 Civ. 0087 (RO) (S.D.N.Y.). As an ad hoc panel chosen expressly for these cases but without any input by private shareholders, this recreated arbitration tribunal under the Hague Agreement of 1930 is presumptively biased for lack of an impartial decision maker. Hooters of America, Inc. v. Phillips, 173 F.3d 933, 938-940 (CA4 1999) (arbitration denied where one party had total control over choice of arbitrators).
B. This Dispute Does Not Come within the Arbitration Clause.
Although the federal policy in favor of arbitration encompasses rights conferred by federal statutes, including the antitrust laws, "the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 626 (1985). The present dispute does not come within the scope of the arbitration clause, which does not cover any dispute between shareholders and the BIS but only disputes "with regard to the interpretation or application of the Statutes of the Bank." This language cannot reasonably be read to include disputes involving price fixing under the Sherman Act, securities fraud under the Exchange Act or common law, or constitutional violations by U.S. officials serving as directors of the Bank.
Nor can this language reasonably be read to include the transaction at issue. Unlike corporate statutes in many U.S. jurisdictions, the Statutes of the BIS never provided authority or procedures for a freeze-out its private shareholders. Because the Constituent Charter incorporated within the Convention expressly provided for the American issue to be held privately, the freeze-out amounted to an amendment of the treaty itself, not the Statutes, and the dispute is therefore one arising under the Convention, not the Statutes.
C. Plaintiff Has Not Agreed to Arbitrate This Dispute.
The BIS claims that the plaintiff agreed to arbitrate this dispute by reason of Article 17 of the Statutes (BIS.A. Ex. D), and the statement on its share certificates in accordance therewith, that "ownership of shares ... implies acceptance of the Statutes of the Bank" (P.A. Ex. G). However, as noted above, the Statutes contained no provision authorizing a "compulsory withdrawal" or freeze-out of private shareholders. Absent such a provision, private shareholders did not have reasonable notice that their shares could be withdrawn on a non-voluntary basis, let alone that in such event their only remedy would be arbitration before a defunct tribunal. What is more, the BIS has not -- and almost certainly cannot -- produce a single document published prior to its press release announcing the proposed freeze-out suggesting that it possessed this power.
Furthermore, the amendments to the Statutes adopted by the BIS to implement the freeze-out provide that shares withdrawn from private shareholders may be transferred to central bank shareholders at the same price (BIS.A. Ex. E, Art. 18A; P.A. Ex. N, Annex). Unless the American issue is so transferred, there will be no basis for continued U.S. participation in the BIS.
Under these circumstances, agents of the federal government acting indirectly through the BIS should not be allowed to circumvent the constitutional processes required for the United States to join the BIS, and particularly to avoid paying "just compensation" for shares of the American issue belonging to private U.S. holders. Accordingly, because this case involves an illegal interference with private property rights under both the Fifth Amendment and international law (Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 712 (CA9 1992)), the existence of an agreement to arbitrate cannot be established without demonstrating either: (1) that American private shareholders waived their Fifth Amendment rights; or (2) that the tribunal effectively secures these rights.
Neither can be shown. The test for determining waiver of a constitutional right is "an intentional relinquishment or abandonment of a known right or privilege." Brewer v. Williams, 430 U.S. 387, 404 (1977), and cases cited. The BIS defendants cannot meet this burden.
D. The Arbitration Tribunal Does Not Satisfy Due Process.
The tribunal's "rules of procedure" are set forth in Annex XII to the treaty (P.A. Ex. B). These rules were designed for disputes between or among sovereign governments, or between them and the BIS, not for disputes between the BIS and its private shareholders. The rules do not provide for pre-trial discovery or the calling and examination of witnesses at trial. Rather, the proceedings are limited to written pleadings with attached documents and oral debates. Each party is required to pay not only its own expenses but also "an equal share of those of the Tribunal." And, as already noted, recreation of the long-defunct tribunal and appointment of members to hear this specific case rested entirely under the control of the BIS and its government allies, rendering the tribunal inherently biased.
In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), the Court upheld application of an employment contract's broad arbitration clause to an age discrimination claim under federal law. Although more limited than in federal courts, pre-trial discovery was available in Gilmer. Also, the employee was not required to pay any of the costs of arbitration. As the First Circuit recently stated: "Gilmer does not mandate enforcement of all arbitration agreements. Plaintiffs are not required to take their claims to biased panels or through biased procedures." Rosenberg v. Merrill Lynch, Pierce, Fenner & Smith, 170 F.3d 1, 16 (CA1 1999). Accord, Hooters of America, Inc. v. Phillips, supra, 173 F.3d at 938-940. The notion that Fifth Amendment due process requirements can be met in the circumstances of this case by a biased arbitration proceeding in a foreign land and at great expense to the plaintiff cannot be seriously argued.
E. Plaintiff Is Entitled to Jury Trial on Disputed Issues of Arbitrability.
Under the Federal Arbitration Act (9 U.S.C. s. 1 et seq.), a party opposing arbitration is entitled to a jury trial on reasonably disputed issues of fact relating to: (1) the existence of an agreement to arbitrate, including whether there was fraud, duress or misrepresentation in connection with the making thereof; (2) the scope, meaning or coverage of the agreement to arbitrate; and (3) whether the opposing party is in default of the agreement. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54-55 (CA3 1980), and cases cited. See Doctor's Associates, Inc. v. Distajo, 107 F.3d 126, 129-130 (CA2 1997), cert. denied, 118 S.Ct. 365. As set forth previously, all these defenses are raised by the plaintiff, who submits that the facts contained in his affidavit and the documents submitted therewith demonstrate that arbitration cannot be compelled as a matter of law. However, if the court finds that grounds for dispute exist as to any relevant facts with respect to the existence or scope of the alleged agreement to arbitrate, or the default of the BIS thereunder, the plaintiff requests trial by jury thereon.
Best Regards, J.T. |
