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[greenyes] NAFTA Chapter 11's Impact on U.S. Judicial System

April 18, 2004
Nafta Tribunals Stir U.S. Worries

fter the highest court in Massachusetts ruled against a Canadian real estate
company and after the United State Supreme Court declined to hear its
appeal, the company's day in court was over.

Or so thought Chief Justice Margaret H. Marshall of the Massachusetts court,
until she learned of yet another layer of judicial review, by an
international tribunal.

"I was at a dinner party," Chief Justice Marshall said in a recent telephone
interview. "To say I was surprised to hear that a judgment of this court was
being subjected to further review would be an understatement."

Tribunals like the one that ruled on the Massachusetts case were created by
the North American Free Trade Agreement, and they have heard two challenges
to American court judgments. In the other, the tribunal declared a
Mississippi court's judgment at odds with international law, leaving the
United States government potentially liable for hundreds of millions of

Any Canadian or Mexican business that contends 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 the Nafta agreement 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 law professor at Georgetown University.

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 a Canadian
concern, the Loewen Group, and companies owned by a Mississippi family, the
O'Keefes. The O'Keefe family, contending that the Loewen Group 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 the next year, 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 United States.

The availability of this additional layer of review, above even the United
States Supreme Court, is a significant development, legal scholars said.

"It's basically been under the radar screen," Peter Spiro, a law professor
at Hofstra University, said. "But it points to a fundamental reorientation
of our constitutional system. You have an international tribunal essentially
reviewing American court judgments."

The part of Nafta that created the tribunals, known as Chapter 11, received
no consideration when it was passed in 1993.

"When we debated Nafta," Senator John Kerry of Massachusetts, the
presumptive Democratic presidential nominee, said in 2002, "not a single
word was uttered in discussing Chapter 11. Why? Because we didn't know how
this provision would play out. No one really knew just how high the stakes
would get."

Senator Kerry spoke before the tribunal rulings concerning the Massachusetts
and Mississippi judgments. He offered his comments in connection with
legislation he had offered to limit the jurisdiction of the tribunals. His
amendment was rejected by the Senate.

Abner Mikva, a former chief judge of the federal appeals court in Washington
and a former congressman, is one of the three Nafta judges considering the
Mississippi case. He declined to discuss it but did offer his perspective on
Chapter 11.

"If Congress had known that there was anything like this in Nafta," he said,
"they would never have voted for it."






Peter Anderson
4513 Vernon Blvd. Suite 15
Madison, WI 53705
Ph: (608) 231-1100
Fax: (608) 233-0011
Cell (608) 438-9062
email: anderson@no.address

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