Arbitration & Mediation

The Best Time to Settle International Disputes? Keep Your Eye on Currency Exchange Rates

By Victoria Pynchon

It is a truism that litigation tends to get worse rather than better over time.  This is as true in the law as it is in physics -- things fall apart.  Your client's clean and righteous narrative tarnishes over time; grows more complex and filled with contradictions.  It's a little like a political campaign.  Barack's ground-breaking race relations speech and Hillary's single tear aside, Clinton and Obama tend to look worse, not better, over time. We all do.

Whether the value of your legal "case" is up today or down tomorrow turns not only upon the most recent documents produced, pre-trial motion won or witness deposed, it also turns on those things that fall apart over time -- including currency exchange rates.   

The micro-economics of settlement timing include corporate events such as quarterly and year-end financial reporting requirements; potential mergers and acquisitions; and, how much financial bleeding your client's divisional president can take this year before worrying about demotion.  

In international disputes, currency exchange rates loom large in the macro-economics of settlement timing.  My own last really "big" case before I left practice was potentially worth a quarter billion dollars in "hard" damages -- the total projected clean-up costs for 500 toxic waste sites in every Canadian province. 

The Canadian dollar was not only weak at the time, it was weakening.  Though the question of whose currency would control was contested, my client was confident that Canadian dollars would eventually govern since clean-up costs by the American plaintiff would be paid in Canadian dollars.  I remember a time when the Canadian dollar was tumbling in value so rapidly that every time I saw opposing counsel in court I'd remind him of the day's exchange rate with a warning that "your case isn't getting any better over time." 

Settlement timing in that case was motion-driven, however, and the matter did not settle until after the entry of a pre-trial judgment in my client's favor pending appeal.

Though I was (and would continue to be) driven by pre-trial losses and victories, savvy settlement counsel would be keeping an eye on macro-economics -- which would, in any international litigation, require someone to be tracking currency exchange rates.

Full post as published by Settle It Now Negotiation Blog on April 24, 2008 (boomark / email).