Viva Zapata! American Procedure and CISG Substance in a U.S. Circuit Court of Appeal

Abstract:     
Working independently, the co-authors of this article each reached the conclusion that the U.S. District Court's decision concerning attorney fees in Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., which was later reversed by the 7th Circuit, was wrong both in result and reasoning. The District Court had held that a party who successfully asserted a claim for breach under the United Nations Convention on Contracts for the International Sale of Goods ("CISG") could recover the costs of attorneys employed in litigating the claim as damages under Article 74 of the CISG. We argue that the CISG was not intended to address the question of recovering attorney fees, most likely because the drafters of the Convention conceived of the issue as a procedural matter outside the scope of the CISG. This is understandable. For example, the 'American rule' on attorneys fees - under which the each party to litigation must bear his or her own attorney expenses, regardless of who prevails in the litigation, unless a contract provision or statute provides specifically for a different result -- is generally understood as a rule of procedure applicable as lex fori. Indeed, as a matter of international practice the rules governing the recovery of attorney fees appear to be regarded as procedural in nature, even when - as is the case in most countries outside the U.S. - they provide for a 'loser-pays' regime that departs sharply from the 'American rule' in substance. As they are understood to fall in the procedural realm, the rules governing the recovery of attorney fees are assumed to be subject to domestic lex fori and not the CISG regime. Although some non-U.S. decisions applying the CISG appear to have interpreted Art. 74 as permitting a prevailing claimant to recover attorney fees as damages, those decisions generally have not approached the issue with the international perspective demanded by Art. 7(1) of the CISG; indeed, upon closer inspection several do not even stand for the proposition that attorney fees incurred during the course of litigation were recoverable as Art. 74 damages. The small number of sometimes-ambiguous and ill-reasoned precedents favouring an award of Art. 74 damages to cover attorney fees, furthermore, fades to virtual insignificance when compared to the vast - nay, overwhelming - majority of CISG decisions in which the recovery of attorney fees has apparently been treated, without comment by the deciding tribunal, exactly as we believe it should be - as a matter governed by the domestic law of the forum.

Number of Pages in PDF File: 12

Keywords: Sales, International Sales, Vienna Sales Convention, United Nations Convention on Contracts for the International Sale of Goods, CISG, Zapata Hermanos Sucesores, S.A. v. Hearthside Baking Co., transnational litigation, commercial arbitration, Article 74, attorney fees, American Rule, loser pays

Accepted Paper Series