2011

David Wotherspoon and Monica Jimenez Gonzalez's article on arbitration related to cross-border commercial transactions appeared in the 2011 edition of the Lexpert® Guide to the Leading US/Canada Cross-Border Corporate Lawyers in Canada.

Below is an excerpt from the article:

The risks involved in cross-border commercial transactions are illustrated dramatically by the now infamous case of O'Keefe v. Loewen Group. The Loewen Group, a Canadian company in the funeral home business, was ordered to pay $100 million in compensatory damages and $400 million in punitive damages by a jury in Mississippi in a case that was initially a $5 million contract dispute. Not only was the verdict absurdly disproportionate to the amount in dispute, it was 200 times larger than the largest award ever upheld by the Mississippi Supreme Court. The Mississippi appellate rules required the Loewen Group to post $625 million within a week to obtain a stay of execution pending the appeal. In the face of an impossible appeal requirement, the Loewen Group was forced to settle the case for $175 million.

Although the extremes of this case are rare, they are also salutary. Arbitration has emerged in many circumstances as the preferable route to resolving business disputes. This article examines the specific issues relating to managing the legal risks that may arise in cross-border commercial transactions. We outline factors businesses and their counsel should consider before entering into international commercial agreements, and how the risk can be managed through arbitration rather than in local courts.