NAFTA tribunals raise legal concerns
ADAM LIPTAK
NAFTA tribunals raise legal concerns
By ADAM LIPTAK New York Times
Sunday, April 18, 2004
After Massachusetts’ high court ruled against a Canadian real estate company and after the U.S. Supreme Court declined to hear an appeal, the company’s day in court was not over. There was yet another layer of judicial review, by an international tribunal.
Such tribunals were created by the North American Free Trade Agreement, and they have heard two challenges to American court judgments.
In the other case, the tribunal declared a Mississippi court’s judgment at odds with international law, leaving the U.S. government potentially liable for hundreds of millions of dollars.
Any Canadian or Mexican business claiming it has been treated unjustly by the American judicial system can file a similar claim. American businesses with similar complaints about Canadian or Mexican court judgments can do the same. Under NAFTA,- the government whose court system is challenged is responsible for awards by the tribunals.
“This is the biggest threat to United States judicial independence that no one has heard of and even fewer people understand,” said John D. Echeverria, a Georgetown University law professor.
In the Massachusetts case, brought by Mondev International, the NAFTA tribunal decided in 2002 that the Massachusetts courts had not violated international law.
But in a separate pending case, brought by a Canadian company challenging the largest jury verdict in Mississippi history, a different NAFTA tribunal offered a harsh assessment of Mississippi justice.
“The whole trial and its resultant verdict,” the three-judge tribunal ruled last summer, “were clearly improper and discreditable and cannot be squared with minimum standards of international law and equitable treatment.”
The Mississippi case arose from an exchange of companies between the Loewen Group of Canada and companies owned by the O’Keefe family of Mississippi. The O’Keefes, contending that Loewen did not live up to its obligations, sued for breach of contract and fraud. Although the tribunal found that the businesses were worth no more than $8 million, a jury in Jackson, Miss., awarded the family $500 million in 1995.
Loewen settled the case for $175 million. But, arguing that the trial had been unfair and that it had been coerced into settling by a requirement that the company post an appeal bond of $625 million, Loewen and one of its owners filed their claim in the NAFTA tribunal in 1998. They asked for $725 million from the U.S.
The availability of this additional layer of review, above even the U.S. Supreme Court, is a significant development, legal scholars said.
“It’s basically been under the radar screen,” said Peter Spiro, a law professor at Hofstra University. “But it points to a fundamental reorientation of our constitutional system. You have an international tribunal essentially reviewing American court judgments.”
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