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NAFTA’s Investment Chapter: Dynamic Laboratory, Failed Experiments, and Lessons for the FTAA

Published online by Cambridge University Press:  28 February 2017

Charles N. Brower
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NAFTA’s Investment Chapter: Dynamic Laboratory, Failed Experiments, and Lessons for the FTAA
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Proceedings of the ASIL Annual Meeting , Volume 97 , 2003 , pp. 251 - 257
Copyright
Copyright © American Society of International Law 2003

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References

1 NAFTA Article 1136(1) provides that awards “have no binding force except be tween the disputing parties and in respect of the particular case.” North American Free Trade Agreement, Dec. 17, 1992, U.S.-Can.-Mex., ch. 11, art. 1136(1), 32 ILM 605 (1993).

2 See id., arts. 1102-09.

3 See Brower, Charles N. & Steven, Lee, Who then Should Judge? Developing the International Rule of Law Under Nafta Chapter 11, 2 Chi. J. Int’l L. 193, 195 (2001)Google Scholar; Brower, Charles H. II, Structure, Legitimacy and NAFTA’s Investment Chapter, 36 Vand. J. Transnat’l L. 37, 44 (2003)Google Scholar.

4 See NAFTA Investor-State Arbitrations, available at <http://www.state.gOv/s/l/c3439.htm> (listing cases against Nafta parties).

5 Robert J. Frank v. Government of the United Mexican States, Notice of Arbitration and Statement of Claim (Aug. 5, 2002), available at <http://www.naftaclaims.com> (alleging expropriation of beachfront property).

6 See Robert Azinian (alleging improper termination of a contract to operate a municipal landfill and waste management system); Marvin Feldman (alleging denial of benefits of certain tax refunds to exporters); Fireman’s Fund Insurance Co. (alleging that Mexico unlawfully facilitated the purchase of debentures denominated in Mexican pesos and owned by Mexicans but did not facilitate the purchase of debentures denominated in U.S. dollars and owned by the claimant); GAMI Investments, Inc. (challenging Mexican regulation of the sugar industry and resulting expropriations); Metalclad Corp. (alleging wrongful refusal to allow the operation of a hazardous waste facility); and Waste Management (alleging breach of concession agreement for waste management services), available at <http://www.naftaclaims.com>.

7 International Thunderbird Gaming Corp. (alleging injuries resulting from the regulation and closure of gaming facilities), available at <http://www.naftaclaims.com>.

8 Luke Eric Peterson, Investor Rights and Wrongs, Toronto Star, June 14, 2002, at A22.

9 See United Parcel Serv. v. Canada, (NAFTA/UNCITRAL) Decision on Petitions for Intervention and Participation as Amici Curiae (Oct. 17, 2001), available at <http://www.naftaclaims.com>; Methanex Corp. v. United States, (NAFTA/UNCITRAL) Decision on Petitions from Third Persons to Intervene as “Amici Curiae” (Jan. 15, 2001), available at <http://www.naftaclaims.com>.

10 See News Release, ICSID, United Parcel Service of America, Inc. v. Government of Canada: NAFTA/UNCITRAL Arbitration Rules Proceeding (May 28, 2001), available at <http://www.worldbank.org/icsid/ups.htm> (noting that “[t]he parties have agreed to make the proceedings open to the public”).

11 See office of the U.S. Trade Representative, Free Trade with Chile: Summary of the U.S-Chile Free Trade Agreement (Dec. 11, 2002), available at <http://www.ustr.gov/regions/whemisphere/samerica/2002-12-ll-chile_summary.pdf>; Office of the U.S. Trade Representative, Free Trade with Singapore: America’s First Free Trade Agreement in Asia (Dec. 13, 2002), available at <http://www.ustr.gov/regions/asia-pacific/2002-12-13-singapore_facts.pdf>.

12 See id.

13 ADF Group, Inc. v. United States (NAFTA/ICSID(AF)), Award (Jan. 9, 2003), available at <http://www.naftaclaims.com>; Mondevlnt’l v. United States (NAFTA/ICSID(AF)), Award (Oct. 11,2002), available at <http://www.naftaclaims.com>; Methanex Corp. v. United States (NAFTA/UNCITRAL), Preliminary Award on Jurisdiction and Admissibility (Aug. 7, 2002), available at <http://www.naftaclaims.com>.

14 There has also been at least one incident of a NAFTA party engaging in lamentable litigation tactics. The Pope & Talbot Tribunal criticized Canada’s unacceptable flouting of its discovery order. Pope & Talbot, Inc. v. Canada, Award in Respect of Damages (May 31, 2002) at paras. 39-42, available at <http://www.naftaclaims.com>. Canada repeatedly denied the existence of, and then belatedly produced, 1,500 critical pages of Chapter 1 l’s travaux préparatoires. The Tribunal found:

Canada has not told the Tribunal where the documents resided, or how a diligent search would have failed to find over forty iterations of Chapter 11. The documents themselves show that Canada possessed them at one time. It is not credible that negotiators would have forgotten their existence. Surely the other NAFTA Parties would have been willing to refresh recollections and provide copies. If Canada did not want to release them, it surely knew how not to do so, as the very letter transmitting the documents to the Tribunal included a refusal to provide other documents. Finally, it is almost certain that the documents provided, which included nothing in explication of the various drafts, are not all that exists, yet no effort was made by Canada to let the Tribunal know what, if anything, has been withheld.

This incident’s injury to the Tribunal’s work can now be remedied, but the injury to the Chapter 11 process will surely linger.

Id., paras. 41-42.

15 See Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, opened far signature Aug. 27, 1965, art. 52, 17 UST 1270, 575 UNTS 159 there in after ICSID Convention].

16 NAFTA, supra note 1, art. 1120(1) (a).

17 NAFTA Article 1120 authorizes investors to arbitrate disputes under:

  1. (a)

    (a) the ICSID Convention, provided that both the disputing Party and die Party of the investor are parties to the Convention;

  2. (b)

    (b) the Additional Facility Rules of ICSID, provided that either the disputing Party or the Parry of the Investor, but not both, is a party to the ICSID Convention; or

  3. (c)

    (c) the Uncitral Arbitration Rules.

Id.

18 Parties cannot seek to enforce awards rendered under the Additional Facility or the Uncitral Arbitration Rules until (1) three months have elapsed without the losing party having commenced a proceeding to revise, set aside, or annul the award; or (2) a court has dismissed or permitted such a proceeding and there is no further appeal. Id. at 1136(3) (b).

19 Metalclad Corp. v. Mexico, ICSID Case No. Arb(AF)/97/l, Award (Aug. 30, 2000), 40ILM 36 (2001).

20 See Brower, Charles N. et al., The Coming Crisis in the Global Adjudication System, 19 Arb. Int’l (forthcoming 2003)Google Scholar.

21 See Outline of Argument of Intervenor Attorney-General of Canada (Feb. 16, 2001), In re Arbitration Pursuant to Chapter Eleven of NAFTA Between Metalclad Corp. and United Mexican States (B.C. Sup. Ct. 2001), available at <http://www.dfait-maeci.gc.ca/tna-nac/documents/canada_submission-e.pdf>.

22 Id., para. 25.

23 Id.

24 See Brower, Charles H. II, Investor-State Disputes Under Nafta: The Empire Strikes Back, 40 Colum. J. Transnat’l L. 43, 68 (2001)Google Scholar; Brower, Charles H. II, Beware the Jabberwock: A Reply to Mr. Thomas, 40 Colum. J. Transnat’l L. 465, 476 (2002)Google Scholar.

25 On February 8, 2001, Canada applied to the federal court for an application to set aside the S.D. Myers Tribunal’s partial award of November 13, 2000. See Notice of Application of the Government of Canada (Ottawa Fed. Ct. Feb. 8, 2001), available at <http://www.naftaclaims.com>.

26 See Brower, Structure, Legitimacy and Nafta’s Investment Chapter, supra note 3, at 91. “NAFTA, supra note 1, art. 1131(2).

28 The interpretive note stated in part:

B. Minimum Standard of Treatment in Accordance with International Law

  1. 1.

    1. Article 1105(1) prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of another Party.

  2. 2.

    2. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens.

  3. 3.

    3. A determination that there has been a breach of another provision of the Nafta, or of a separate international agreement, does not establish that there has been a breach of Article 1105(1).

NAFTA Free Trade Comm. Notes of Interpretation of Certain Chapter 11 Provisions (July 31,2001), available at <http://www.dfait-maeci.gc.ca/tna-nac/NAFTA-Interpr-e.asp> (emphasis added).

29 See David Williams, Challenging Investment Treaty Arbitration Awards—Issues Concerning the Forum, paper presented at the 16th Congress of the International Council for Commercial Arbitration (May 12-15, 2002), at 20 (on file with the author) (citing critics).

30 See Pope & Talbot, Award in Respect of Damages, supra note 14, para. 21 (noting that “the Investor argued that what the Commission had done was to amend Article 1105(1) by inserting the word ‘customary’ before ‘international law’ and thus limiting international law for the purposes of Article 1105 to only one of its sources”); see also Second Opinion of Professor Sir Robert Jennings, Q.C., a former president of the International Court of Justice, Methanex Corp. v. United States (NAFTA/UNCITRAL Sept. 6, 2001), at 6 (describing the Interpretation as “amending the treaty to curtail investor protections”) available at <http://www.naftaclaims.com>.

31 See Pope & Talbot, Award in Respect of Damages, supra note 14.

32 See Pope & Talbot, Inc. v. Canada, Notice of Arbitration (Mar. 25, 1999), at 2, available at <http://www.naftaclaims.com>.

33 Pope & Talbot, Inc. v. Canada, Award on the Merits of Phase 2 (Apr. 10, 2001), para. 195, available at <http://www.naftaclaims.com>.

34 See NAFTA Free Trade Comm’n, supra note 28 and corresponding text.

35 Pope & Talbot, Award in Respect of Damages, supra note 14, para. 47.

36 See id., para. 51.

37 Id., para. 57.

38 Id., paras. 57, 65.

39 See id., para. 91.