This is a three-hour (180 minutes) examination. Any LL.M. student whose native language is not English is entitled to an extra hour for a total of four hours (240 minutes).

Please write your examination number at the top right-hand corner of this page and hand in these examination questions together with your blue book at the end of the examination. This is particularly important because you will write the answers to the first part of the examination immediately below the questions rather than in the blue book.

This is an open book examination. During the examination you may consult any written materials except materials checked out from Underwood Law Library. You may, however, consult photocopies of library materials.

Read each question carefully. Follow directions. Think before you write. If you find an ambiguity that affects your answer to a question, make reasonable assumptions and state these clearly in your answer. Be concise. Be clear.

> This part of the examination consists of short-answer questions. Write your answer to each of the following questions on this examination paper in the space provided immediately following each question. Explain each answer in no more than three sentences. You will receive full credit for an answer only if there is an explanation.

1. "Although the General Agreement on Tariffs and Trade does not require the United States to adopt a Generalized System of Preferences for developing countries, the GATT does require the United States to make any GSP program the United States adopts to be available to all developing countries without discrimination." Is this statement true or false?

2. "If the Government of Peru grants a five-year tax free period to any foreign investor who invests more than USD $10,000,000 in the development of Peru's computer manufacturing industry, this grant is a 'subsidy' within the meaning of the U.S. countervailing duty law." True or False?

3. "Ms. Kurda, an employee of a Slovakian subsidiary of a Texas corporation, makes a payment to a Slovakian political party on behalf of the subsidiary. The leaders of the political party promise that in return for the payment they will look favorably on the repatriation of local profits to the Texas parent corporation. Officers of the parent corporation know of the payment. Ms. Kurda has violated the U.S. Foreign Corrupt Practices Act." True or False?

4. "If the International Trade Administration finds that a foreign enterprise has dumped products in the United States, the president must impose an antidumping duty." True or False?

5. "Alleging a breach of warranty, a Texas buyer refuses to pay the purchase price promised to the French seller. The French seller obtains a judgment against the buyer from a French court in the amount of the purchase price. The buyer was given official notice of the law suit in France but chose not to appear. The seller asks a Texas court to enforce the French court's judgment. Texas has adopted the Uniform Foreign Money-Judgments Act. Assuming that the French court had jurisdiction over the Texas buyer, the Texas court will enforce the judgment." True or False?

6. "The 'right of priority' provided by the 1883 Convention of the Union of Paris gives the holder of a patent obtained in one State party to the 1883 Convention priority over everyone who subsequently tries to obtain a conflicting patent in any other State party to the Convention." True or False?

Howdy Doody Enterprises, Inc. ["HDE"] is a Dallas-based corporation established under the Texas Business Corporation Act. HDE has established a network of "Howdy Doody Restaurant" franchises throughout the United States. As with similar franchise operations, HDE provides detailed guidance on restaurant services and it licenses the franchisee to use HDE's trade name and trademarks.

In 1991, following the dramatic political changes in Eastern Europe, HDE decided to expand its franchise business to selected Eastern European countries. In addition to franchises in Hungary, HDE entered into a master franchise agreement with a joint venture in the [fictitious] Republic of Mastodonia. A Mastodonian state enterprise owns fifty-one percent of the joint venture; HDE owned the remaining 49%. HDE made this investment and entered into the franchise agreement under the newly-adopted Mastodonian foreign investment law. HDE registered its trade mark "HOWDY DOODY (tm)" pursuant to Mastodonian trade mark laws.

The master franchise agreement with the Mastodonian joint venture provides, inter alia, the following terms:

4. Franchisor hereby licenses Franchisee to use the trade name "Howdy Doody Restaurant" and the trade mark "HOWDY DOODY" (tm) in connection with the franchise operations authorized by this agreement. Franchisee is authorized to grant a sub-license with respect to this trade name and trade mark to sub-franchisees. This license shall last for the term of this agreement but the license shall end at any time the Franchisee defaults on its obligations under this agreement. Franchisee may only grant sub-licenses subject to the terms of this master franchise agreement.

5. Franchisee agrees to pay Franchisor for the use of the trade name "Howdy Doody Restaurant" and the trade mark "HOWDY DOODY (tm)" a monthly royalty of four per cent (4%) of the gross sales of all sub-franchises. Franchisee shall pay this monthly royalty in U.S. dollars.

8. On thirty (30) days notice, either party may terminate this agreement for good cause. The occurrence of any of the following events shall constitute good cause:

(a) If Franchisee defaults in the payment of royalties as provided in this agreement; . . .

(e) If Franchisor or Franchisee is unable to carry on business under this agreement because of domestic or foreign government regulation.

9. If there is any dispute, controversy, or claim arising out of the franchise operations authorized by this agreement, the parties agree to submit the dispute to binding arbitration under the auspices of the Vienna Arbitration Centre in Vienna, Austria. The arbitration shall be conducted in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law.

During 1994, however, the government of the Republic of Mastodonia took several steps that have effected the relations between HDE and the Mastodonian joint venture.

In January 1994, faced with a shortage of hard currency, the National Bank of Mastodonia issued foreign exchange regulations that permitted the remission of U.S. dollars only when needed for the acquisition of essential goods. As a consequence, the joint venture has remitted no royalty payments since January. Instead, the joint venture deposits the royalty payments in an account at a Mastodonian bank. No interest is earned on this account and HDE is not authorized to withdraw sums from the account until the foreign exchange regulations are amended to allow withdrawals.

In May 1994, the government amended the foreign investment law to require each foreign investor to transfer ownership of all intellectual property used in connection with the investment to a "qualified" Mastodonian entity at the end of ten years from the time a trade mark is registered in Mastodonia. An entity is qualified if Mastodonian citizens own a controlling interest. The qualified entity must pay for the trade mark. The amount payable is to be determined by Mastodonian government officials with appeal to an administrative court. This payment is in the local currency and is to be made in equal monthly installments over a three-year period. The amendment to the investment law applies to all trade marks presently registered or to be registered in Mastodonia.

After unsuccessful negotiations with the Mastodonian government to obtain exceptions to the foreign exchange regulations and the May amendments to the foreign investment law, HDE now consults you. HDE asks you the following questions:

(1) Does HDE have any recourse against the Mastodonian government for the acts taken by the Mastodonian government? (HDE characterizes the acts of the Mastodonian government as expropriation.)

(2) Does HDE have the right to terminate the master franchise agreement?

(3) If HDE does terminate the franchise agreement over the objection of the joint venture, may the joint venture force HDE to submit the dispute to binding arbitration?

Texas Oilpipe Industries, Inc. (TOI) sold pipe to an oil drilling enterprise in Saudi Arabia. Under the terms of the sales contract, the Saudi drilling enterprise had a Saudi bank issue a letter of credit. First National Bank of Houston confirmed the letter of credit. The letter of credit requires that TOI present documents evidencing the delivery and acceptance of the pipe by the buyer in Saudi Arabia. The letter of credit states that it is issued subject to the Uniform Customs and Practices for Documentary Credits (ICC Pub. No. 400, 1983 Revision).

TOI delivered the pipe to the buyer and, upon accepting delivery, the buyer handed over to TOI the documents that the buyer had prepared to evidence delivery in accordance with Saudi law. TOI promptly presents these documents to First National Bank of Houston evidencing acceptance. These documents include a certificate that states: "We declare that the goods are neither of Israeli origin nor do they contain Israeli materials nor are they being exported from Israel." The bank officer examining these documents concludes on the day of presentment that the documents comply with the letter of credit but she wonders whether the bank should honor the presentment in the light of U.S. anti-boycott legislation.

The following day First National Bank consults you for advice on whether the bank should pay TOI in accordance with the confirmed letter of credit. What is your advice? (As for the anti-boycott legislation, assume that the law reprinted in the Documents Supplement is complete and up-to-date.)