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 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. Good luck!

A. Lone Star Cooling Equipment, Inc. is a producer of air conditioning equipment located in Dallas, Texas. It has received an inquiry from Equatoria Hotel Enterprises to purchase air conditioning equipment for export to Equatoria [a fictitious tropical country]. Lone Star hires you to draft the sales contract with Equatoria Hotel. Lone Star wants to get paid under a letter of credit as it does not trust Equatoria Hotel to pay upon delivery of the equipment. Advise Lone Star on the type of provision it should include in the sales contract to assure payment under a letter of credit.

B. Equatoria Hotel does cause its bank, the Commercial Bank of Equatoria (CBE), to issue a documentary letter of credit in favor of Lone Star. The letter of credit is, by its terms, governed by UCP 500 and is advised by the Bank of Texas, with whom CBE has a correspondent banking relationship. CBE is owned by the Republic of Equitoria and has no offices in Texas or elsewhere in the United States. The letter of credit provides for a bill of lading showing shipment of the equipment on board the ship "O'hara" out of the port of Houston.

Lone Star ships the equipment and receives the bill of lading from the freight forwarder showing shipment aboard the "O'bara." Lone Star presents this bill of lading and the other shipping documents to Bank of Texas. Nine banking days later, Bank of Texas notifies Lone Star that it has been instructed by CBE to dishonor the draw because of discrepancies in the drawing documents.

Lone Star has already shipped the equipment. It again seeks your advice on what to do. Does it have rights under the letter of credit against Bank of Texas? CBE? If it decides to sue these institutions in the United States, what defenses might it anticipate?

Norgeland is a [fictitious] newly-independent nation in Eastern Europe. Its citizens have had excellent educations but the economy is in transition from a socialist economy to a free market economy. The president of Norgeland has issued an official decree stating that Norgeland encourages foreign investment in Norgeland. There is no general investment law, but the decree says that the government of Norgeland will make suitable arrangements with foreign investors.

PC Printers Inc. ("PCP") is a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania. PCP manufactures and sells laser printers for personal computers. It owns a U.S. patent for an important component of the printer. It manufactures the printer in the United States, Germany, and the Philippines. Although it sells some printers in Europe and in Pacific Rim countries, PCP sells principally in the United States.

PCP has had difficulty filling all the orders from U.S. buyers. Costs of manufacturing printers in Germany have also become very high. PCP therefore decides to establish a subsidiary in Norgeland.

The following four problems have arisen in the course of making the investment and operating the subsidiary. Advise the PCP on any three of the four problems.

PCP sends one of its managers, a U.S. citizen, to establish a subsidiary. The manager's first act is to hire a lawyer who specializes in the legal problems of foreign investors. The attorney is a citizen of Norgeland. She was trained at the principal Norgeland law school and then studied in the United States, where she received an LL.M. degree from S.M.U. She is the sister of the president of Norgeland.

On advice from its attorney, PCP submits applications to the Patent Agency for a patent on its printer component. The Director General of the Patent Agency tells the PCP manager that the Agency will not be able to examine PCP's application for at least three years because there are not enough trained employees at the Agency to review the large number of patent applications. On advice from the attorney in Norgeland, the PCP manager offers to establish a "full" scholarship (covering tuition and all reasonable expenses) to an Agency employee to study engineering for four years at a U.S. university. The Director General accepts this offer for the Patent Agency. When thanking the PCP manager for the scholarship, the Director General announced that the Agency would examine PCP's patent application within the next month and that the first recipient of the scholarship would be his son, a young employee of the Patent Agency. Two months later the Agency approves the patent application. The normal wait before the Agency reviews applications is about three years and the review itself normally takes at least one year. No one questions that PCP's invention satisfies the requirements of Norgeland's patent law.

You are asked by PCP whether PCP, its manager, or its Norgeland attorney has violated the U.S. Foreign Corrupt Practices Act by what it has done in Norgeland. (A copy of the FCPA is attached as an appendix to this exam.) Please advise PCP.

PCP enters into an agreement with the Norgeland Ministry of Industry to establish a joint venture to build PC printers in Norgeland. Fifty-one percent of the shares of the joint venture are to be owned by a Norgeland state enterprise to be designated from time to time by the Minister of Industry.

The Ministry of Industry also agrees to sell land to the joint venture. PCP selects the land, which is owned by a state enterprise. The Ministry then exercises its right of eminent domain (i.e., expropriated) to take over the land. Following precedents under the Norgeland constitution, the Ministry promptly pays the state enterprise the book value of the land. The Ministry immediately sells the land, on long-term credit, to the joint venture for the amount the Ministry had paid for it. At the time of this sale the market value of the land is ten times its book value.

Within six months, the joint venture is producing its first printers. The cost of manufacturing each unit is $180. If the joint venture had had to pay the market value of its land, the cost to manufacture each unit would be $200. The joint venture sells the units in Norgeland for $190/unit. It exports the units to the United States, where it sells the units for $225/unit. The cost of shipping the units to the United States is $15/unit. PCP had been selling units manufactured in the United States for $235/unit, which is the market price for similar printers manufactured by PCP's U.S. competitors.

PCP wishes to know if there is any danger that it has violated U.S. law on dumping or subsidies. Advise it.

The Norgeland joint venture sells its printers in Norgeland for $190/unit and after three years the joint venture has a stable market.

In the third year a former employee of the joint venture sets up a separate enterprise to manufacture competing printers. The new enterprise purchases the patented PCP component from the PCP joint venture and then assembles this component into printer units that look exactly the same as the PCP printer. The new enterprise then exports these units to the United States. The new enterprise markets these units under the name of "Excel printers" at a price of $210/unit. It advertises the units as being "as good as" PCP printers. The new enterprise offers a very limited warranty and little after-sale service in the United States.

PCP directs the Norgeland joint venture not to sell the PCP components to the new enterprise. At a meeting of the joint venture, however, the Norgeland partner in the joint venture votes to continue such sales on the stated ground that to discriminate among buyers on the market would violate Norgeland "free market" law. PCP's attorney in Norgeland advises PCP that this stated ground is plausible. She also notes that the Patent Agency also has authority to require the joint venture to license manufacture of the patented component.

PCP now asks you whether it has any recourse under U.S. law to exclude the import into the United States of the printers manufactured by the competing Norgeland enterprise. Advise it.

The United States has been putting pressure on many different countries and international organizations to link trade issues with protection of the environment and the rights of workers. The U.S. ambassador to Norgeland tells the president of Norgeland that U.S. government aid to Norgeland may be dependent on Norgeland's support for the U.S. position on linkage. The president thereupon issues a decree requiring all enterprises in Norgeland with investment from the United States (and from countries supporting linkage) to hire designated Norgeland government "monitors" to make sure that these enterprises comply with Norgeland environmental and labor laws. No other enterprises are required to hire such monitors. Payments to these monitors are established at a rate determined by the rate that would have to be paid in the United States for similar work by qualified persons. These payments are more than four times the normal salary of the Norgeland monitors.

PCP calculates that the cost of the newly-required monitors will make the difference between running the joint venture at a loss or at a profit. It believes that the Norgeland president's action is taken in retaliation to the official U.S. position. PCP asks you whether the action amounts to expropriation of its investment in Norgeland and, if so, what recourse it might have. Advise it.