Thursday, November 10, 2005

Federal Court Refuses to Vacate NAFTA Award in Loewen

One of the most important NAFTA Chapter 11 decisions is Loewen v. United States. The Canadian company brought a $725 million claim against the United States arguing that a Mississippi state court judgment constituted a violation of NAFTA. The claim questioned whether the state court appeals process (particularly the appeal bond) could constitute an unlawful investment restriction under NAFTA. The arbitral tribunal dismissed the claim on jurisdictonal grounds. A copy of the final award is here. (The full docket sheet is here).

The Canadian petitioner sought to have the award vacated pursuant to the Federal Arbitration Act. Last week, the D.C. district court dismissed the claim as untimely. A copy of the decision is here. The court ruled that Loewen should have filed after the final award, not the decision on reconsideration. Sounds mundane, but there is a fundamental question of procedural fairness embedded in the dispute. NAFTA expert Todd Weiler has more:
The judge’s reasoning, unfortunately, leaves much to be desired. In a nutshell, the application was dismissed for being filed too late, given that the final award was issued in June 2003 and the application was not filed until December 2004. While it is true that the application was filed long after the three-month statutory bar had expired, NAFTA watchers will immediately note that the reason Loewen took so long to file his application was that the Tribunal failed to provide reasons specifically addressing the disposition of his claim in its Final Award. It then proceeded to take an unacceptable period of time to issue a clarification that succinctly (to put it charitably) ended the matter. Loewen’s application was made within three months of his finding out that he indeed did lose. Obviously this should have been the appropriate date against which the time bar should have been applied.

For the judge to actually dismiss Loewen’s application for wont of timeliness simply defies logic, because this reasoning would have required Loewen to file his application before knowing whether one even needed to be filed. If this decision is the final word on the saga of Loewen’s NAFTA claim, it will perhaps be fitting. After having been denied justice in Mississippi, and having received a very questionable decision at the hands of a NAFTA Tribunal, is that surprising that this DC judge would have decided any differently?

Hopefully this decision will not be the last word, however, for while the question of whether his annulment application should succeed remains open, there is no doubt that – at long last – Mr. Loewen should have been given a full and fair hearing on the merits of his case.
Weiler may be right, but there is a question that obviously comes to mind when you have $725 million on the line: doesn't the better part of discretion suggest that you file a claim for vacatur after the original Final Award and the subsequent Decision on Request for Reconsideration? One of the two motions likely would be procedurally barred, but not both. The Motion to Vacate did not explain its failure to file earlier, stating without explanation that the U.S. request for clarification "precluded Mr. Loewen from seeking to vacate the Award at that time." How so?

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