However, a Canadian generic drugs company, with substantial sales in the USa market, is pursuing a rare arbitration claim against the US government under the foreign investment protection chapter of the North American Free Trade Agreement (Nafta).
Over Nafta’s 15-year history, only a few foreign investors have tried their luck in suing the US government for mistreatment of foreign-owned investments.
Perhaps most famously, a large Canadian-owned funeral company, the Loewen Group, attempted to use Nafta to challenge rough justice meted out by the Mississippi courts. However, after millions of dollars in legal fees, arbitrators declined to hold the US liable for mistreatment of the company.
The verdict was widely panned by arbitration advocates, who wondered if adjudicators were reluctant to antagonise the US government lest Congress react by pulling the plug on Nafta altogether.
More recently, Canadian-based Apotex signalled in December 2008 that it was ready to try its luck in arbitration. The drug company claims that it has been “denied justice” in the US federal courts, where it has sought a judgment that would bring clarity to a muddy patent dispute with Pfizer.
Apotex has been trying to bring a generic version of the popular anti-depressant Zoloft onto the US market. However, the company says that it cannot run the risk of a patent lawsuit from Pfizer. Apotex accuses several US courts, including the Supreme Court, of sitting on their hands – rather than stepping up to resolve the legal uncertainty surrounding the Zoloft patents.
As a foreign investor in the US, Apotex is now invoking a set of legal protections pledged to Canadian investors under Nafta. It is asking arbitrators to censure the US Supreme Court – a move that would attract the ire of US sovereigntists, including many in the US Senate, who are wary of any supra-national body “over-ruling” the US courts.
The irony is that arbitrators are often called upon to review the actions of government decision-makers in the developing world. Indeed, a panel is hearing a claim brought by Californian oil company Chevron against Ecuador.
Chevron argues that the Ecuadorian courts have mishandled a string of long-running oil contract disputes. Among other things, the oil giant is asking arbitrators to rule that Chevron has been “denied justice” in the Ecuadorian courts.
The Ecuadorian government has reacted angrily to the charge that its courts are politicised and ineffective. It insists that Chevron is seeking an arbitral ruling for strategic reasons: the company faces a potentially mammoth damages judgment in a major environmental pollution lawsuit in the Ecuadorian courts.
According to the government view, Chevron will try to counter- enforce any environmental judgment – including in foreign courts – by brandishing an arbitration decision that declares Ecuador’s court system to be substandard.
Chevron denies Ecuador’s dim view of its motives. But the Ecuadorian affair and Apotex’s looming clash with the US serve as reminders that the highest court in the land – at least where foreign investors are concerned – is not necessarily a host country’s supreme court.
Luke Peterson is the editor of Investment Arbitration Reporter (www.iareporter.com), a legal news, analysis and intelligence service.