Loewen Group, Inc. and Raymond L. Loewen v. United States of America
ICSID · Investment (ICSID and treaty) · United States · 26 Jun 2003
Why it matters
Loewen v. United States is a landmark NAFTA case that established the continuous nationality requirement for investor-state arbitration. It clarified that a change in the investor's nationality during proceedings can defeat jurisdiction, even if the underlying claim has merit. The case also addressed the exhaustion of local remedies and the standard of treatment under NAFTA Article 1105.
Summary
The Loewen Group, a Canadian funeral home company, and its founder Raymond Loewen brought a NAFTA claim against the United States after a Mississippi jury awarded $500 million in damages (including $400 million punitive) in a commercial dispute with a local competitor. Loewen alleged that the trial was tainted by anti-Canadian bias, racial prejudice, and class-based animus, and that the Mississippi courts' refusal to reduce the $625 million appeal bond forced a coerced settlement for $175 million. The ICSID tribunal found that the Mississippi proceedings were unfair and criticized the conduct, but ultimately dismissed the claims on jurisdictional grounds. During the arbitration, TLGI filed for Chapter 11 bankruptcy and assigned its NAFTA claims to a newly created Canadian corporation (Nafcanco) owned by a US corporation. The tribunal held that this assignment broke the continuous nationality requirement under NAFTA and international law, depriving the tribunal of jurisdiction. Raymond Loewen's claims were also dismissed for lack of evidence of ownership or control. The tribunal emphasized that while judicial wrongs can in principle be brought under NAFTA, the treaty does not create an appellate mechanism for domestic court decisions.
The detail
Parties: Loewen Group, Inc. and Raymond L. Loewen v. United States of America
Case number: ICSID Case No. ARB(AF)/98/3
Outcome: The Tribunal dismissed all claims for lack of jurisdiction due to a break in the continuous nationality requirement after TLGI assigned its NAFTA claims to a Canadian corporation owned by a US corporation.
Applicable law: NAFTA Chapter Eleven, ICSID Additional Facility Rules
Issues in play: The case involved the collision between NAFTA's requirement of continuous nationality of the investor and the assignment of claims in bankruptcy. The tribunal held that the assignment broke the chain of nationality required for jurisdiction.
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