International Pressure to Harmonize: The U.S. Civil Justice System in an Era of Global Trade

[I]t is at least problematical whether an unjust sentence against a foreigner ... would not, if unredressed, be an aggression upon his sovereign, as well as one which violated the stipulations in a treaty or the general law of nations.1 - Alexander Hamilton 1. INTRODUCTION The United States has long lectured about the rule of law to other countries-traditionally to Latin America, but lately also to Asia, Africa, and eastern Europe.2 Americans emphasize that the rule of law is necessary to those who participate in the global economy. The U.S. government and private organizations have done more than lecture; they have devoted considerable resources to helping other countries establish effective legal systems.3 Public and private groups regularly send lawyers and judges out to developing countries as missionaries preaching the importance of an independent judiciary, fair and settled substantive rules, and even-handed application of the law.4 But it behooves us to set our own house in order, not to ignore problems with our justice system that themselves undermine international trade and our position as advocates of the rule of law in the world. We ourselves are less than perfect in this regard and may in fact be in violation of international agreements because of it. While many American jury verdicts are reasonable, in cases involving foreign or out-of-state defendants, they can be very large and bear little relation to the actual injury suffered.5 This is a recognized problem for American business and is increasingly a problem for foreign businesses too, as a result of greater global trade and investment.6 The U.S. Supreme Court has thus far shown few signs of acting to resolve the problem.7 The U.S. Congress has tried multiple times to pass tort reform bills, but it has failed.8 Scholarly attention has focused on these two methods of solving the problem of excessive verdicts. However, where the Supreme Court and Congress have failed, a new group of international agreements might succeed. This article will focus on an agreement that may prove especially potent in reining in verdicts: the North American Free Trade Agreement ("NAFTA"). Since other trade agreements are likely to be patterned on NAFTA, including the proposed Free Trade Agreement of the Americas ("FTAA"),9 it is important to understand NAFTA's potential impact on the U.S. justice system. Our desire for international trade is starting to collide with our unusual (by international standards) system of civil justice, and that collision may generate tension that saps support for international trade agreements. One of the key features of NAFTA is its provisions for individual investors to sue foreign nations directly to enforce the agreement's guarantees.10 These are known as investor-state provisions and are a change from the traditional international law system, in which only a state could bring an action against another state. Through investor-- state provisions, "public" international law has become more private. The United States has long championed investor-state provisions as a way to prevent countries from expropriating U.S. citizens' investments, particularly in Latin America. In general, capital-exporting countries favor investor-state provisions to protect their citizens from lesser-developed countries' temptation to confiscate foreign assets. In addition to this procedural mechanism, NAFTA encompasses a substantive doctrine that capital-exporting countries have invoked against less-developed countries: the prohibition of denial of justice.11 Under this international law doctrine, a state is responsible for injustices committed by its courts as well as by its executive or legislature. Denial-of-justice claims were frequently brought when the underlying cause was physical harm to or incarceration of individuals; most of these situations are now covered by international human rights law. …