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Case Details

The court, which decided the case “Vino Import v. Farnese Vini”, is the United States District Court, Eastern District of Pennsylvania. Decided on 29th August 2000.

The type of court is the United States federal court.

The Countries from which the litigants belong are, the appellant belongs from the Country USA and the defendant based from the Country Italy.

In an exclusive distribution agreement, it is an agreement entered between two parties herein the appellant and the defendant. Exclusive distribution takes place where the supplier herein Farnese Fini S.r.l grants the distributor Viva Vino Import Corporation exclusively of the sale of the contract goods and services within a territory or a specific group of customers. In return, the distributor agrees to sell the goods and services of the supplier (Ajibo 2013).

 In the above case, the plaintiff wanted the United Nations Convention on Contracts for the International Sale of Goods (CISG) to apply or Pennsylvania law should apply to all issues set out in the plaintiff's claims (Schaffer 2012)

In the above case both the parties are the signatories of the CISG Treaty, which governs the contract between two parties for sale of goods and services whose place of business are in two different Countries unless the contract provide otherwise. The two foreign nations are USA and Italy. The agreement entered between an U.S. corporation, the appellant Company, and an Italian company herein referred to as the defendant. The agreement under which appellant was to distribute defendant's wines in the United States. There was a disagreement between the parties before they performed these contracts and plaintiff sued the defendant for breach of contract, promissory estoppels, and tortuous interference with such business relations. On such the defendant also counter claimed for breach of contract (Chirelstein 2013)

CISG does not apply to the above case since CISG does not apply to tort claims. In the above case the plaintiff, complain about the Italian Company who sells wine to the plaintiff, which set forth, torts claims. The plaintiff’s claim for tort is not applicable to business relations. CISG also does not apply to exclusive distributorship agreement because the agreement between them did not provide for sale of a particular or specified quantity of goods at a particular stated price value. The Court said that the CISG does not govern the non-contractual claims (Johnson 2011).

The plaintiff wanted the United Nations Convention on Contracts for the International Sale of Goods (CISG) to apply or Pennsylvania law, which should apply to all issues, set out in the plaintiff's claims whereas the defendant contended so that the Italian law  should apply.

Exclusive Distribution Agreement and Application of CISG and Pennsylvania Law

Pennsylvania Choice of law clause binds the parties to the contract. Both the parties should review the choice of law clause together with the choice of forum clause, as Pennsylvania courts look at both the provisions to determine whether to adjudicate the claim and what law to apply. Under Pennsylvania's choice of law analysis, the Court must first determine whether a false or true conflict exists between the competing forums. A false conflict exists where "only one jurisdiction's governmental interests would be impaired by the application of the other jurisdiction's law" or if they are no difference between the laws of the jurisdictions. If there is no false conflict, assumed a true conflict and Courts must determine which jurisdiction has the greater interest in the application of its law (Llewellyn 2016)

The United States District Court, Eastern District of Pennsylvania Court is of the opinion that, Pennsylvania has the greater interest in the case therefore judgment or order referring to Pennsylvanian law and not United States’ law.

Under Pennsylvania's choice of law analysis, the Court must first determine whether a false or true conflict exists between the competing forums. Found that false, conflict exists where "only one jurisdiction's governmental interests would be impaired by the application of the other jurisdiction's law" or no difference between the laws of the jurisdictions then there is no false conflict. Deemed conflict and Courts must determine which jurisdiction has the greater interest in the application of its law. The above case presents a true conflict with respect to both the contract and tort claims at issue. However, the Court is of the opinion that Pennsylvania has the greater interest (Mason and Stephenson 2015)

In determining which jurisdiction has the greater interest in a contract dispute are:

  1. The place Pennsylvania is the place of contracting of the agreement
  2. The parties belong from USA and Italy therefore the place of negotiation of the agreement took place either in Pennsylvania or in Italy.
  3. The place of performance is in Pennsylvania. Even though the defendant argues that the place of performance was in Italy but the wines shipped at Free On Board, as a result the defendant would not be responsible post the wines delivered for shipping. Even the whole thing affects liability issues but it does not have anything to do with the performance of the contract. It concludes that the performance of the agreement was in Pennsylvania (Roosevelt 2012)
  4. The location for the subject matter of the agreement is Pennsylvania
  5. The appellant company is aPennsylvanian corporation and its permanent place of business, residency and nationality of the business of Viva Vino Import Corporation is at United States whereas the place of incorporation of the defendant company Farnese Vini S.r.l is an Italian based company and its permanent place of business, residency and nationality is at Italy

The Civil Court makes the choice of law in order to determine the validity and enforceability of the contract and the extent to which the rights and obligations are set out. The contract is enforceable only if it is legal under law of the forum. Choice of law is different to the choice of jurisdiction, nationality, domicile, residence, contracting and negotiating place and the contract may expressly select different law and jurisdiction, or a different jurisdiction determined by statute or international convention. The selection of law and jurisdiction affects the governing law, forum, practice and procedural rules and enforcement. In tort law, the rule is that the place of the tort is the governing law (Saunders and Rymsza 2015)

Choice of Law Analysis and Ruling

This foreign law is sometimes useful to get some information but one should be dependent and use its own national law for coming to the conclusion. The Court concludes based on the law of the Country and not on foreign law. Tort law will not apply to a jurisdiction where the action has not occurred. This eliminates any kind of unfairness. In case of disputes arising where parties belong from different Countries, choice of law and jurisdiction are important for tort, when this tort rule may be replaced by statute, or governing law where the tortuous act is governed by statute or international convention(Viscasillas 2013)

The council is a research establishment dedicated towards the promotion of common interest of the American continent, thereby allowing cooperation in the regional countries and provides a proper platform for Latin-American Policy making.

The objectivities of the organization is based on the promoting cooperation between the Latin-American companies and help in policy formation between U.S and the Latin countries.

The council created on the sole basis of protection, thus it prompted the organization to formulate this report to bring about awareness in the investors, not only in Brazil but also in the other stock exchanges that included, New York, Madrid and Buenos Aries. The basis of this report was also a way to help the emphasis on policies formulated by the U.S government. It is a request to take care on policy formulation. The Petrobras is a global scandal that highlighted the ill effects of political corruption, requiring notice by the common mass.

Various elements such as politicians, businesspersons and influential employees of the industry were drastically involved in the entire scandal. Mainly construction company employees were throat driven into the entire process. Businesspersons such as Marcelo Odebrecht (CEO Odebrecht Company), Otavio Azevedo (CEO, Andrade Gutierrez), Jose Aldemario Pinheiro Filho (CEO, OAS group.), Dalton Avancini (CEO, Camargo Correa), Ricardo Pessoa (CEO, UTC), Gerson Almada (CEO, Engevix) were all investigated and subsequently prosecuted by the free minded judiciary. The scandal also put in line several high profile company employees and politicians that include people from the ruling as well as the opposition parties. The scandal is widespread, carving its way into the system gradually (Arruda de Almeida and Zagaris 2015)

Contributing to about 13% of the GDP, the company is a semi public organization that is owned to an extent of 54% by the government, providing a valid legal connection between the government and the company, where the majority of the voting rights rests on the government, giving them the opportunity to decide majority of the matters in the company.

Petrobras Scandal in Brazil and Ethical Issues of Bribery and Embezzlement

The contract will fall in the domain of Private International law because the contract exclusively is a deal between two private individuals that include, judiciary personalities, thus a company. Public international law is on the other hand concentrated on the relationship and dealings between two states that includes treaties, criminal extraction agreements and other relevant details that are required for the governance processes, thus the public international law does not cover this case scenario.

The legal charges levied against the individuals were serious; they were mainly ranging into two of the major issues that concern the corporate world in the recent years. The cases of bribery and embezzlement were the chief highlighted factors that formed an important part of the whole picture in the scandal. The construction companies whereby they took hold of most of the lucrative contracts illegally formed a cartel system, eliminating the process of competition, thus forcing a burden on the economic condition of the company, providing for a narrow bottom-line that has affected not only the company but also other areas of the company. Ethically the company and politicians were wrong on many parts. The politicians illegally cheated the people by placing public officials in high places and cheating the investors and the employees of the industry took heavy bribes by which they allocated company resources illegally, affecting the future prospects of the company, thus these were the two ethical issues in question (Melo 2016).

Market capturing is an important factor that determines the decline of free competition; a company tries to expand drastically by capturing the production process of a particular product or market. In the current scenario, the company Petrobras has a large market in the Brazilian market, regards to petroleum extraction. The advantage of a dominant position, useful in this case, for the company individuals and high employees, who passed off lucrative contracts and involved themselves in bribery, giving birth to one of the biggest scandals in Brazilian history. The free competition market is important, where a single mistake by any individuals in the market can prove fatal for their future equation. Free competition is thus the only available answer to keep these scandalous corporate raiders away from the circumference of the investors (Narine 2015).

The Petrobras scandal came down heavily on the people of Brazil heavily affected because of the mess. The company contributes to about 10% of the economy in the form of GDP contribution, the scandal heavily reduced the GDP to about 15%, thereby livelihood and income affected. Reduced confidence in the construction companies reduced employment to an extreme level. The scandal also affected the lives of investors, not only in Brazil but also in New York and other places, where a reduction in share price, financially caused a problem on their part. The scandal involved giving an overall negative impact reduced public spending, economic decline, impact on livelihood, political unrest and other variable factors that negatively affected the population (da Silveira 2015)

The government officials were deeply involved in the scandal, whereby several government officials hired into influential positions in the company. The hiring process made it easy for the officials to turn a dead eye towards the ongoing scandal, instead providing a platform to fuel the corruption ahead in the form of illegal favoritism, by allocating lucrative contracts, which affected the financial situation of the company. A direct link provided between the employees and the corrupt individuals who fueled the scandal continuously (Terra 2016).

The offshore companies were involved in laundering and keeping the money in order for the corrupt construction company executives, Petrobras employees and politicians involved in the scandal. The tax Heaven off shore companies are a major leeway for the safekeeping of black money.

Offshore companies classified into two categories, where one part says that, they are companies registered in an offshore financial center that normally acts as a tax heaven or it may be a company involved in off shoring manufacturing or business services. In this present scenario that first one applies, whereby the corrupt people involved, laundered their money to offshore companies, freeing themselves of the taxing process entirely (Vianna 2014).

Petrobras is a globally listed company, with branches in New York, Madrid and Buenos Aries, giving it a base in the investor market. The scandal thus takes a global stage because of its involvement in many countries as a business house. The status of a global oil extractor makes the scandal a major problem giving it a large-scale approach (Romero 2015).

The executive is a mainly a mixture of corrupt politicians who are more power driven, trying to sniff in any opportunities towards corruption. Personal agenda is a priority for these individual, neglecting the usual line of duties assigned to complete. The Judiciary is more free minded, democracy driven individuals who strive to attain the best cases of justice afforded without any expense. The separation of judiciary from executive is thus necessary to keep democracy safeguarded away from the personal agenda people who constantly put in the effort to influence Judiciary (Vile 2012).

Bribery and embezzlement are serious charges in the modern era, which carries enough weight age to destroy the reputation of a concern, not only disrupting the image of the company but also the image of the country. It will become increasingly difficult for a country to enter into business agreements with the country, a possibility of another corruption generally clouds the minds of individuals in the government. The reputation of the parent country is ruined, thus the necessity of punishment remains to address the problem in a harsh way. The parent country should follow strict policies by which future scandals avoided to the advantage of the country.

References

Ajibo, K., 2013. Facing the truth: An appraisal of the potential contributions, paradoxes and challenges of implementing the United Nations conventions on Contracts for the International Sale of Goods (CISG) in Nigeria. Journal of Sustainable Development Law and Policy (The), 2(1), pp.175-189.

Chirelstein, M., 2013. Chirelstein's Concepts and Case Analysis in the Law of Contracts, 7th (Concepts and Insights Series). West Academic.

Johnson, W.P., 2011. Understanding Exclusion of the CISG: A New Paradigm of Determining Party Intent. Buff. L. Rev., 59, p.213.

Llewellyn, K.N., 2016. The common law tradition: Deciding appeals (Vol. 16). Quid Pro Books.

Mason, A.T. and Stephenson, G., 2015. American constitutional law: introductory essays and selected cases. Routledge.

Roosevelt, K., 2012. Choice of Law in Federal Courts: From Erie and Klaxon to CAFA and Shady Grove.

Saunders, K.M. and Rymsza, L., 2015. Contract Formation and Performance Under the UCC and CISG: A Comparative Case Study. Journal of Legal Studies Education, 32(1), pp.1-46.

Schaffer, J.K., 2012. The boundaries of transnational democracy: alternatives to the all-affected principle. Review of International Studies, 38(2), pp.321-342.

Viscasillas, P.P., 2013. Applicable Law, the CISG, and the Future Convention on International Commercial Contracts. Vill. L. Rev., 58, p.73

Arruda de Almeida, M. and Zagaris, B., 2015. Political Capture in the Petrobus Corruption Scandal: The Sad Tale of an Oil Giant. Fletcher F. World Aff., 39, p.87

da Silveira, A.D.M., 2015. Ten Adverse Outcomes When Managers Focus on Creating Shareholder Value: A Review. Browser Download This Paper.

Madalina, B.O.I.A., 2017. Economic And Social Environment-Global Outlook 2016 And Beyond. Revista Economic?, 69(1).

Melo, M.A., 2016. Crisis and integrity in Brazil. Journal of Democracy, 27(2), pp.50-65.

Narine, M., 2015. Cuban Conundrum: Corporate Governance and Compliance Challenges for US Publicly-Traded Companies, The. U. Pa. J. Bus. L., 18, p.865.

Romero, S., 2015. Brazil’s oil scandal: Public malaise, institutional resilience.

Terra, C., 2016. Brazil: self-inflicted pain. Browser Download This Paper.

Vianna, M.P., 2014. Brazilian State Owned Enterprises: A Corruption Analysis.

Vile, M.J.C., 2012. Constitutionalism and the Separation of Powers. Liberty Fund.

Wedy, G.T., 2016. Climate Change and Sustainable Development in Brazilian Law. Browser Download This Paper.

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[Accessed 01 March 2024].

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