Friday, May 22, 2015

Ridiculous Political Reporting on Legal Issues

Mark Tushnet

Politico had a story yesterday about assistance Elizabeth Warren gave the United States in its appearance before a NAFTA arbitration tribunal in the Loewen Group case. The sting of the story appears to be that Senator Warren is some sort of hypocrite for opposing the TransPacific Partnership agreement because it contains an Investor State Dispute Settlement process just like the NAFTA one, in which she participated. (Although perhaps the sting of the story is that then-Professor Warren was paid a fair amount -- "up to $90,000" [what, they couldn't find the actual number?] -- for what she did. That comes to between $200 and $400 an hour. In 1999-2000, when the events occurred, $200 per hour would have been at the low end of an academic lawyer's hourly rate, $400 in the middle of the range.)

The "money quote" in the story seems to me to be this: "She ... did not appear to have any qualms about participating in this process that she now finds appalling." What the story doesn't make clear is that Warren provided an expert opinion whose point was to make it more difficult for the Loewen Group -- and others in similar cases -- to displace the US courts in determining who should win trade disputes. And that's consistent with the position she's now taking -- that the TPP's arbitration mechanism will take trade disputes out of the US courts and put them in the hands of an arbitration panel.

It seems to me that a decent analogy is this: During the 1930s some Southern courts had an appalling practice of "lynch law" -- truncated, blatantly unfair trials of African American charged with crime. A forensic specialist who has previously denounced lynch law provides expert testimony that the defendant's fingerprints don't match those found at the crime scene. I don't think that the expert would have had, or should have had, "any qualms about participating" in a process the expert "finds appalling."

I confess to finding political reporting about legal issues generally appalling. For example, after reading quite a few stories about Hillary Clinton's e-mails, I still don't have a clear idea -- from the stories -- of what the actual legal requirements were at the time she maintained two e-mail accounts, except that it doesn't seem to be the case that any law or regulation actually required that she use only an official account for official e-mail (there seem to have been "good practice" recommendations that didn't carry the force of law -- but frankly, I can't tell what the state of the law actually was).

Now, for those who want even more detail:

The Loewen Group case is a complicated one. The Loewen Group, a Canadian firm, complained that a jury in Mississippi, influenced by a trial lawyer's nativist attacks on foreign-owned companies, said that it had to pay a huge amount in punitive damages ($400 million dollars in punitive damages compared to $100 million in actual damages). Mississippi law required losing parties to post appeal bonds of 125% of the amount. Loewen Group unsuccessfully tried to get the Mississippi courts to stay the appeal bond requirement -- that is, to say that it could proceed with an appeal without posting the bond. They refused to do so.

At that point a standard requirement in international arbitration proceedings kicked in. Before invoking arbitration, you typically have to do what you can to get relief from the domestic -- here, the United States -- courts. The Loewen Group did go to the state courts, but was that enough? For example, could they have tried to get the US Supreme Court to stay the appeal bond?

The United States wanted to give the "domestic remedies" requirement an expansive reading. Its lawyers looked at the US bankruptcy law and saw that (generally speaking) filing for bankruptcy leads to an automatic stay of pending legal proceedings. So, if the Loewen Group's complaint was that it couldn't afford to post the bond, it had -- in the US government's view -- another domestic remedy to avoid the bond requirement: It could file for bankruptcy.

International arbitration panels treat domestic law as a matter of fact, meaning that the US government had to prove that filling for bankruptcy would lead to an automatic stay. The way you prove that is through testimony -- usually, an affidavit -- from an expert in the field. And that's where Professor Warren came in. She was retained to provide an expert opinion to the effect that yes, indeed, the Loewen Group would have gotten a stay of the bond requirement if it had filed for bankruptcy.

The point of all this detail is that Professor Warren's testimony was for the purpose of making it harder for a Canadian company to win in the arbitration proceeding. (And, indeed, the Loewen Group did lose on the ground [I'm condensing a lot of detail here, and my summary is quite rough] that it had not exhausted its domestic remedies -- though the panel didn't rely on the bankruptcy stay provision.) That's entirely consistent with Senator Warren's position that international arbitration isn't a good way, from the US point of view, for resolving trade disputes.

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