Courting danger: The latest Latin American export to the United States: Product liability lawsuits - Special Report

Latin Trade, Feb, 2002 by Mary A. Dempsey

Inconsistencies from country to country make it difficult for corporations to protect themselves from lawsuits. Some U.S. manufacturers have opened local facilities in each of the countries where they operate as a strategy for isolating other country operations from liability; failing to do that, they often seek to locate their headquarters away from U.S. states known for high jury awards. Multinationals working in partnership with Latin American companies also plan carefully to limit their liability. And when corporations settle cross-border cases in the United States, they seek agreements that preclude them from being sued again by the same plaintiffs in a Latin American court.

Belated action. Product liability lawsuits arrived before a globalized legal structure was in place to deal with them, sparking today's catch-up effort toward harmonized laws. The National Law Center for Inter-American Free Trade, set up to rectify trade practice disparities during negotiations over the North American Free Trade Agreement, is currently preparing a report on Latin America and product liability lawsuits. The aim is to develop suggestions for streamlining legal issues across borders. Boris Kozolchyk, director of the Tucson, Arizona-based law center, says uniformity in procedures--rather than in size of awards or extent of liability--is likely to be the first step.

Florida attorney Luis Perez says shifts are already evident, "Latin America may be lagging behind us a few years but what we see there mirrors what we are seeing here," says Perez, a lawyer at Shook, Hardy & Bacon in Miami. "Countries like Venezuela, like Brazil and Argentina are becoming more favorable to punitive damages."

Some of the countries are also embracing legislation that raises the hackle of legal scholars in the region. Ecuador's recently implemented Law 55, for example, bars its courts from hearing lawsuits that are first filed in foreign courts, even if foreign judges throw out the cases. That controversial law threatens to turn U.S. courts into the only recourse in some cases. It also brings to the forefront the question of how well Ecuador's legal system--at least when it comes to product liability--is protecting its own constituents.

Other Latin American legislative bodies are responding to public demand by updating laws. And corporations themselves have undoubtedly modified policy in a preemptory way, complying with U.S. laws even when they are doing business in countries with more lax standards and adopting global operating procedures. But the legal system's rejiggering, within and without, promises to be a slow and complicated process.

In the interim, the United States is dealing one-by-one with the lawsuits as they arise--and that promises to be no small task. As John Molloy, a former U.S. judge now working at the National Law Center, puts it: "We're now bringing in litigation from an entire continent."