A tribunal set up to redress injustices under the auspices of the North American Free Trade Agreement has rejected a Canadian businessman's attempt to rescue his business after a Mississippi jury sent it into bankruptcy almost a decade ago.
"I'm just floored by this," said Ray Loewen yesterday about the tribunal's ruling, adding that while he is discussing an appeal with his lawyers, the free-trade agreement stipulates tribunal decisions are final.
The Loewen Group of Vancouver was in 1995 ordered to pay US$625-million in damages to a local businessman over a contractual dispute involving US$10-million. He had sold his business to the Loewen Group, but wanted more money.
The complainant's lawyer portrayed the Canadian company as a foreign predator that should be taught a lesson, and the jury complied. An appeal of that verdict was impossible under Mississippi rules unless the company set aside the entire US$625-million in trust -- which it was unable to do since that amount equaled the company's net worth. The company settled for US$175-million and went bankrupt, with Mr. Loewen losing US$100-million.
The tribunal was set up under Chapter 11 of NAFTA, which is supposed to guarantee "full protection and security" for foreign investors in each country and defines the process for redress. Tribunals adjudicate claims against governments and comprise one representative from each side and a third chosen by mutual agreement.
This tribunal ruled that Mr. Loewen had a right to appeal in Mississippi but opted instead to settle for the $175-milion. This meant he was not damaged.
Since NAFTA was established in 1993, fewer than one dozen claims have been made. Roughly half resulted in compensation and half were dismissed.
In June, 2003, the same tribunal dismissed a claim from The Loewen Group made by its successor company, Alderwoods Group. The tribunal severely criticized the Mississippi court, said the Loewen company had been a victim of injustice but dismissed its claim on a technicality involving jurisdiction, saying that the company was no longer a "foreign" victim because it emerged from bankruptcy registered as a U.S. corporation.
Mr. Loewen's claim was being handled separately from the Alderwoods claim.
"It's been a terrible nightmare. Beyond description," Mr. Loewen said in an interview last month. "Only faith and family have kept me going. There are no words to describe what happened to me."
Legal expert Michael Goldhaber took the Mississippi tribunal to task in a March article in the National Law Journal.
He wrote that the admission by the tribunal that there was an injustice in the Alderwoods case helped Mr. Loewen's claim.
"The arbitrators may regret being quite so forthright. Because --oops -- according to the claimants, the panel simply forgot that there is also an individual claim asserted by Loewen Group founder Raymond Loewen. There would seem to be no jurisdictional objection to Ray Loewen, who remains a Canadian citizen. The panel is reconvening," wrote Mr. Goldhaber.
The U.S. Chamber of Commerce is campaigning for "tort reform" that would cap jury awards and crack down on extraordinary awards such as that which occurred in Mississippi.National Post
