Go to case presentation: Zapata Hermanos v. Hearthside Baking, 7th Circ. (19 November 2002)

Excerpt from University of Copenhagen, Law Faculty, Newsletter (December 2002); reproduced with permission of the author

Viva Zapata! CISG Article 74 and the American Rule

Joseph Lookofsky

An interesting CISG question involves the relationship between the "foreeseeability" rule in Article 74 and the so-called "American rule" regarding lawyers' fees. Under American rules of procedure (and contrary to the lex fori in Scandinavia and elsewhere), the losing party in an American litigation is generally not required to reimburse the winning party for its lawyers' fees. If the "American rule" is applied in a breach of contract (e.g. CISG) case, this might look like an exception to the Art. 74 principle of "full expectation-interest protection", but -- as argued in Understanding the CISG in Scandinavia (2d ed. 2002), pp. 142-143 -- the rule (which applies in all U.S. civil cases, not just contract cases) -- is really a procedural rule. See also Lookofsky at <http://cisgw3.law.pace.edu/cisg/biblio/lookofsky5.html>; see also Flechtner at <http://cisgw3.law.pace.edu/cisg/biblio/flechtner4.html>. For a different view see <http://cisgw3.law.pace.edu/cisg/biblio/felemegas1.html>.

According to Lookofsky and Flechtner, it was very surprising that a U.S. Federal District Court (citing CISG Article 74 and foreign "CISG precedent") held that the successful Mexican plaintiff in the "Zapata" case should recover its lawyers' fees, since this District Court decision goes "against" the American (procedural) rule: see Understanding, p. 143.

For the same reason, it should not be surprising that the District Court decision in Zapata has just been reversed (19 Nov. 2002) by a Federal Court of Appeals. The main point of the opinion -- written by Judge Richard Posner, the "father" of Law & Economics-- is simply this: "shifting" lawyers' fees is a question of procedure, not contract (CISG) law, and such procedural questions are governed by the (local) law of the forum. The full text of Judge Posner's decision is available at [<http://cisgw3.law.pace.edu/cases/021119u1.html>].

Pace Law School Institute of International Commercial Law - Last updated January 8, 2003